Investment process (GTAA) (DAA)

GTAA

In our GTAA portfolios, we assess the expected relative performance of a broad range of asset classes and take positions in them on a tactical basis in order to generate return. We implement trades primarily through long/short positions in liquid exchange traded futures and FX forward contracts. For clients who are using GTAA as an overlay to their overall portfolios, these derivatives provide a number of advantages: they do not interfere with the underlying portfolio (no large capital moves); they allow separation between security selection and asset allocation (alpha diversification); and they require only a limited amount of cash for implementation. The resulting portfolios have no strategic market bias.

The investment process is based on added value coming from three sources of return:

 

Risk management is of vital importance when we bring all these sources of investment ideas together into a Global TAA portfolio. Risk managers within the Global Balanced Solutions team are therefore an integral part of the portfolio management process.

DAA

The starting point when considering DAA is the belief that it is not necessary to invest in all asset classes at all times: the key is to invest in those asset classes that rise in price. If clients share this belief, then they should be willing to consider a dynamic approach to asset allocation. DAA provides such an approach, one in which we focus on investing in those asset classes that rise in price and avoiding those that do not. This compares favorably to a more traditional balanced fund approach, in which positions are taken versus a strategic benchmark.

We believe that:

• Dynamic Asset Allocation (DAA) is a simple and transparent capability
• Returns are generated from selecting the right asset classes and regions, not through security selection
• It offers efficient and transparent implementation, without direct exposure to short positions or leverage
• It offers rigorous and fully-integrated risk management
• The capability is run by an experienced and credible team, dedicated to managing TAA/DAA mandates