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Insights.

RISK-BASED STRATEGIES FOR TRUE DIVERSIFICATION

8/4/2019

 
Picture
  • We contrast the performance of risk-based index strategies to asset-based strategies in a multi-asset context.

  • Risk-based strategies include indices targeting a Risk Parity portfolio and Min Variance portfolios for GBP investors.

  • Risk-based strategies offer differentiated risk-return characteristics for portfolio diversification.
 
What is risk-based multi-asset?
Risk-based strategies are an alternative approach to multi-asset investing.
 
For traditional asset-based strategies, such as a 60/40 equity/bond portfolio, asset weights drive risk characteristics.  For risk-based multi-asset strategies, risk characteristics drive asset weights.
 
How does this compare to factor investing?
Factor-based index strategies typically look at screening single asset class securities for a particular factor.  For example, Minimum Volatility equity index is typically constructed with a single asset class, e.g. equities whose constituents exhibit the lowest volatility characteristics.  By contrast, For multi-asset strategies a Minimum Variance strategy targets the minimum variance multi-asset portfolio.
 
Risk-based multi-asset strategies reflect a portfolio construction approach, rather than a factor screen.  It is the set of rules by which a multi-asset portfolio is optimised.
 
What risk-based multi-asset strategies are available?
We focus on five well researched risk-based multi-asset strategies:
  1. Minimum Variance
  2. Risk Parity
  3. Maximum Deconcentration
  4. Maximum Sharpe
  5. Maximum Decorrelation

Access the full report here
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  • WHO WE ARE
    • About
    • Contact
    • Events
    • Press
  • WHAT WE DO
    • Portfolio Solutions >
      • Our Portfolios
      • Custom Portfolios
    • Fund Solutions >
      • Our Funds
      • Custom Funds
    • Index Solutions >
      • Our indices
      • Custom Indices
    • SPECIALIST STRATEGIES >
      • Money Market Funds
      • Retirement Income Solutions
      • Retirement Portfolios
      • Adaptive Portfolios
      • UK Equity Income
      • Multi-Asset Income
      • Liquid Real Assets
      • Dynamic Risk Parity
      • Gold and Precious Metals
      • Enabling Net Zero
    • Supporting Advisers >
      • Investment Committee Support
      • Regulatory Support
    • CPD
  • WHO WE HELP
    • Financial Advisers
    • Discretionary Managers
    • Fund Providers
  • Insights