Global Multi-Asset Portfolios FAQs
Why does dynamic asset allocation make sense for clients?
Dynamic asset allocation allows portfolios to move promptly to reflect any changes in the economic or market environment. The Global Multi-Asset Portfolios are dynamically managed and incorporate Schroders’ latest asset allocation views. Having the flexibility to make changes to the asset allocation promptly is important whatever the investment climate but even more so during periods of market volatility. That is because dynamic asset allocation can help to mitigate losses and make the path of returns smoother. For advisers and their clients, such an approach offers the reassurance that the assets are being continually monitored and managed in the best possible way in line with a client’s risk tolerance and objectives.
With interest rates high and inflation even higher, what is the benefit of using a dynamic asset allocation strategy over holding cash?
Cash is a great asset class for short-term or rainy day savings and for the first time in years savers are enjoying a reasonable return on their money. But holding cash is not the best approach for those who want to grow their wealth over the long term. Historically, returns on cash have failed to keep pace with inflation, whereas equities have significantly outperformed cash over the long term and offer the most likely opportunity to beat inflation over a long time horizon. Equities are important for investment growth over a multi-year time horizon, but so too is being diversified and dynamic. The Global Multi-Asset Portfolios are fully diversified across asset classes, geography, sector and investment style, and they benefit from active management in both their asset allocation and stock selection.
What is the difference between strategic asset allocation and dynamic asset allocation?
The strategic asset allocation of a portfolio is the main factor that will drive returns over the medium to longer term and should closely reflect both what a client is hoping to achieve and their attitude to risk. To get this first step in portfolio construction right, we use the long-term capital market assumptions from our in-house economics group, which include assumptions on the level of risk of each asset class and the relationships between them. It also includes a long-term expected return based on factors that drive economic growth, such as increasing population size and improving productivity. From this, we build a series of graded strategic allocations to reflect the needs of different clients from the most adventurous to the most cautious. Yet investment markets move constantly due to external events, cyclical changes in the economic environment and shifting investor sentiment. This means there will inevitably be times when individual asset classes deliver returns towards the negative extreme of what can normally be expected. There will also inevitably be some moments when the way that asset classes behave in relation to one another doesn’t conform to what would be expected in normal conditions. The answer is to combine a solid underlying strategic asset allocation framework with a dynamic approach to asset allocation, which addresses cyclical and event driven changes in market risks and opportunities. This is the approach that the Schroder Global Multi-Asset Portfolios take.
Traditional low-cost products can struggle in certain market environments. What makes the Schroder Global Multi-Asset Portfolios different?
During certain periods, equities and bonds have fallen in tandem and some markets around the world have been disproportionally affected. We designed the Global Multi-Asset Portfolios to overcome such challenges. The portfolios avoid the rigid asset allocation and home bias that has been commonplace in some other low-cost multi-asset strategies. Although the portfolios are predominantly invested in global equities, bonds and cash, we can also allocate to commodities, currencies, property and other alternatives when we have conviction in these assets. Importantly, the mix of assets in each portfolio is dynamically managed within its risk parameters to take opportunities and avoid risks as they are presented by the markets.
What do I get for my 22 basis points?
The portfolios give advisers and their clients the best of all worlds – active multi-asset investing at passive prices. With the Global Multi-Asset Portfolios, clients can invest in a fully diversified multi-asset portfolio, dynamically managed to adapt to an ever-changing investment environment, at a price that is capped at 0.22%. They retain more of the profits their portfolio makes, while harnessing the best of Schroders, from the specialist resources of our multi-asset and economics teams to the capabilities of more than 700 investment experts in equities, fixed income and alternatives around the globe. Advisers get a choice of five carefully conceived and dynamically managed portfolios, ranging from Cautious to Adventurous, designed to meet the risk profiles and objectives of a wide range of clients. They also get all the associated benefits of partnering with an asset manager with our scale and strength in multi-asset investing, from trust and confidence in our single-fund solutions to high quality reporting and other resources that can help them to build better client relationships.