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The rise of multi-asset solutions in recent years has been well documented and for good reason: years of easy monetary policy have resulted in high asset prices despite the fact that global corporate earnings have gone roughly sideways for ten years. Further, regulatory developments, along with the changes to pension freedoms and new hybrid products across equity, fixed income, and alternatives, have been pivotal in moving the focus for institutional fund management to multi-asset.
Speaking to Investment Week, Moz Afzal, CIO and Senior Portfolio Manager at New Capital, says a multi-asset approach can smooth returns and reduce volatility over a market cycle.
“From a UK perspective, new regulation stemming from the Retail Distribution Review has been a key driver behind the uptake in multi-asset investing,” he says. “Within the investment community, there is now more focus on costs to implement. In the past institutional managers had a lot of in-house capability, but the industry is recognising that for small and mid-size funds, having your own in-house team is quite expensive. And as a result the trend towards multi-asset investing has accelerated.”
Afzal runs New Capital’s Strategic Portfolio UCITS Fund, which launched in December 2014 and encapsulates the group’s macro-driven asset allocation process. The Fund invests in global equities and bonds, commodities, real estate, and hedge funds, aiming to offer consistent risk-adjusted returns across different market conditions.
“The interest rate cycle is the dominant component of our portfolio construction process,” Afzal says. “And that is really driven by interest rate expectation, inflation expectation and how monetary policy moves or shifts around that.”
He adds that the team blends the best ideas from New Capital’s teams from around the world to deliver inflation plus returns for investors, but with an eye on volatility. This allows them to capture individual potentially high-return investments sufficiently diversified to reduce overall risk of the portfolio.