Introducing Elston Adaptive Portfolios
- The objective of the Elston Adaptive Portfolios is to provide a multi-asset portfolio defined by % equity risk, where the equity allocation has a bias to Value/Yield-factors, and the non-equity allocation is adaptive between Bonds and inflation-resilient Alternative Assets (e.g. Real Assets exposures) and Alternative Strategies (e.g. Absolute Return funds), depending on the outlook for inflation and interest rates.
- The strategy represents and adaptive version of the traditional equity/bond portfolio.
- Read the article in FT Adviser: How much should portfolios adapt over time?
About the portfolios
The portfolios are designed to:
- 5 risk profiles, but adaptive
- add value/yield bias to Equities
- uses Alternatives and Bonds
About this strategy
Why this strategy
This strategy is designed to rethink portfolio construction to adapt to changing markets.
Equities: Equities provide potential for long-term growth and inflation protection. Adding a factor tilt can help adapt near-term positioning too.
Bonds: an adaptive approach means adjusting the Bonds allocation based on the changing interest rate and credit risk outlook.
Alternatives: Alternative Assets & Alternative Strategies can adapt to provide diversification and/or downside protection.
The allocation between Bonds and Alternatives can adapt to changing inflation and risk outlook.
1. FIVE RISK PROFILES, BUT ADAPTIVE
The strategies have a clear and familiar risk budget, as defined by equity risk. But the portfolio construction approach is adaptive to changing markets.
2. ADD VALUE/YIELD- BIAS TO EQUITIES
Equities provide potential for long-term growth and inflation protection. Adding a factor tilt can help adapt near-term positioning too. A bias towards Value- and income Yield-factor focused funds aims to improve inflation resilience. Value- and Yield-factor equities are typically “shorter equity duration”, meaning their intrinsic value is linked to resilience of earnings today. By contrast, the promise of higher earnings in the distant future is associated with “longer duration or Growth-factor equities”, which are more sensitive to changes in interest rates and inflation.
3. USE ALTERNATIVES AND BONDS
Traditional nominal Bonds, such as Gilts, UK Corporates and Global Bonds are the mainstay for the lower-risk part of traditional multi-asset portfolios. Traditional Bonds suffer in higher inflation regime. The allocation between Bonds and Alternatives can adapt to changing inflation and risk outlook. Using Alternatives such as risk-constrained Real Assets, Diversifed Income and Absolute Return strategies provides potential to access a different return pattern to Bonds for diversification and differentiation.
This strategy is designed to rethink portfolio construction to adapt to changing markets.
Equities: Equities provide potential for long-term growth and inflation protection. Adding a factor tilt can help adapt near-term positioning too.
Bonds: an adaptive approach means adjusting the Bonds allocation based on the changing interest rate and credit risk outlook.
Alternatives: Alternative Assets & Alternative Strategies can adapt to provide diversification and/or downside protection.
The allocation between Bonds and Alternatives can adapt to changing inflation and risk outlook.
1. FIVE RISK PROFILES, BUT ADAPTIVE
The strategies have a clear and familiar risk budget, as defined by equity risk. But the portfolio construction approach is adaptive to changing markets.
2. ADD VALUE/YIELD- BIAS TO EQUITIES
Equities provide potential for long-term growth and inflation protection. Adding a factor tilt can help adapt near-term positioning too. A bias towards Value- and income Yield-factor focused funds aims to improve inflation resilience. Value- and Yield-factor equities are typically “shorter equity duration”, meaning their intrinsic value is linked to resilience of earnings today. By contrast, the promise of higher earnings in the distant future is associated with “longer duration or Growth-factor equities”, which are more sensitive to changes in interest rates and inflation.
3. USE ALTERNATIVES AND BONDS
Traditional nominal Bonds, such as Gilts, UK Corporates and Global Bonds are the mainstay for the lower-risk part of traditional multi-asset portfolios. Traditional Bonds suffer in higher inflation regime. The allocation between Bonds and Alternatives can adapt to changing inflation and risk outlook. Using Alternatives such as risk-constrained Real Assets, Diversifed Income and Absolute Return strategies provides potential to access a different return pattern to Bonds for diversification and differentiation.
