The Income Generation Process Should Be Independent of the Asset Allocation Process
Portfolio managers should not be driven into asset classes they find unattractive, simply to meet an income objective.
Risk Exposures Must Be Intentional
Investing in a diversified2 set of global asset classes, taking only systematic risks that we expect to be rewarded, is the best way to deliver the optimal return for the risk taken.
Anticipating Volatility Is Crucial
Only by anticipating volatility can we manage a portfolio’s broad asset mix to meet our volatility target.
Tactical Asset Allocation Can Add Value
Allocation within asset classes - e.g. between regions or high-quality and lower-quality securities - can add value.
Flexibility Improves Outcomes
A flexible approach – in terms of asset weights and implementation – is the optimal way to meet our objectives.
Innovative Approach to Income
Process Built for Income Generation
Volatility-Targeting Process to Provide a Stable Risk Profile
An Academically Rigorous Approach, Applied in a Real World Setting
Dynamic Positioning To Capture Current Opportunities
The Portfolio Solutions Group employs a differentiated volatility-targeting investment approach that seeks to harness the power of risk.
As market conditions warrant, the team dynamically adjusts the portfolio's mix of equities, fixed income, commodity-linked assets and cash, to align with the agreed risk target on an ongoing basis. We typically adjust the broad asset mix 1-2 times each month, based on anticipated event risks. However, in extreme markets we may need to adjust positions more frequently, to maintain a stable risk profile.
Within the four broad asset classes, we determine preferences across regions and sub-asset classes and make tactical adjustments to the portfolio. Tactical positions are determined through the analysis of three factors: Fundamental Dynamics, Valuations and Sentiment.
In addition to yields from traditional asset classes, the GBI Strategy sells put options with the goal of enhancing income. Together, these two income sources are expected to produce 5%1 in annual income. By including the sale of put options in the process, investors can benefit from a differentiated source of income that is not dependent on the prevailing yield environment.
The Portfolio Solutions Group's risk-targeted asset allocation process is consistently applied to all GBaR portfolios, but tailored to client-specific guidelines and objectives. All GBaR portfolios are managed according to the following 3-stage investment process, whilst stage 4 enables us to help enhance income for portfolios that target this.
Team members may be subject to change at any time without notice.
Effective 1 November 2023, Andrew Harmstone became an advisor to the Strategy.
Effective 1 November 2023, Rui De Figueiredo, Ryan Meredith, Jim Caron and Damon Wu are the Strategy’s Lead Portfolio Managers, forming the Investment Committee.