MARKET VIEW 13
„ There is a strong need for investors to have other, alternative tools available to be able to diversify equity beta risk. Asbjørn Trolle Hansen, Head of NAM’s Multi Assets Team
Protection in any market conditions Unlike other approaches to running multi-asset portfolios, which require a manager to continually make the right macro call, NAM’s Multi Assets Team seeks to identify a select number of truly uncorre- lated positions that are able to deliver for investors in all market conditions.1 “We consider a broad and diversified set of different risk premia (typically around 20-30), spread across strategy types and asset classes,” Trolle Hansen says. “One example is the use of defensive currencies, selected on quality characteristics and attractive valuation. During recent sell-offs, defensive currencies have provided superior downside protection to many traditional bond sources.” Successfully navigating the severe volatility on display at the height of the Covid-19 shock was no coincidence. Rather, NAM’s Multi Assets Team has repeatedly proven its ability to deliver in the most challenging environments.2 “We have been through 1 There can be no warranty that an investment objective, targeted returns and results of an investment structure is achieved. The value of your investment can go up and down, and you could lose some or all of your invested money. 2 The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of your investment can go up and down, and you could lose some or all of your invested money.
During the Covid-related market turmoil, NAM’s range of liquid alternative vehicles again demonstrated their resilience.
market turmoil such as during the Covid crunch in the first quarter of 2020. NAM has three strategies in its Alpha suite, which are managed in the same way, but cater for differing risk/return profile preferences: the Nordea 1 – Alpha 7 MA Fund , the Nordea 1 – Alpha 10 MA Fund and the Nordea 1 – Alpha 15 MA Fund . Alternative instruments for diversification Trolle Hansen is particularly concerned about the risk-reduction role of fixed income within a multi-asset portfolio. “Fixed income’s diversifica- tion potential is significantly decreased at current interest rate levels. Therefore, there is a strong need for investors to have other, alternative tools available to be able to diversify equity beta risk within portfolios,” Trolle Hansen explains. “This has become more pressing than ever, particularly as the traditional diversification potential that inves- tors have been used to in the past has shrunk even more significantly over the past two years.” The sharp equity market sell-offs investors experienced in March and September 2020 highlighted the dilemma investors face, namely: duration versus equity beta. “It is imperative to have proprietary alternative defensive strategies at your disposal that can help investors fight this dilemma and achieve portfolio diversification,” Trolle Hansen points out.
At a glance ` The old-fashioned method of constructing a multi-asset portfolio may have reached its limits, due to the inability of fixed income to adequately diversify equity risk in a low-yield environment ` NAM’s Multi Assets Team looks beyond traditional asset classes and seeks to exploit the opportunities available in alternative risk premia ` Investors must prepare for a more complex market environment in the years ahead, as uncertainties continue to mount
ISSUE 02.2021
Made with FlippingBook - professional solution for displaying marketing and sales documents online