ASSET ALLOCATOR INSIGHT INVESTMENT
Keeping an eye on the target
Theme-based investing usually leads investors down the equity route, but what if you
want the positives of the theme, with the liquidity that equities provide, but without the
downside equity market volatility? Insight’s Mike Pinggera explains
BY GARY CORCORAN
Investors over the past 18
months have suffered from
the poor management of
risk in even the most diversified
of portfolios as all
asset classes correlating to
each other in a downward
rushing environment was
somehow not seen as a
risk, or at least not acted
on once it was spotted. By
contrast, investors are
applauding all asset classes
as they correlate upwards.
Value at risk models
may well capture all the
interdependencies of the
asset classes but they also
assume that asset classes
behave normally – yet it is
in normal market conditions
that investors do not
need the benefits of
diversification.
l Taking out risk
Target return funds have an
added uphill battle, such is
the short-term memory of
most investors, as when
markets are heading north
they tend to forget about
any previous losses and
jump on the equity (or corporate
bond last year)
bandwagon. Target return
funds usually come into
their own just after the
investors themselves have
spotted huge portfolio
losses, and usually after
most of these losses have
already been made.
Mike Pinggera, head of
the multi-asset group at
Insight Investment, whose
flagship fund is the £250m
Diversified Target Return
Fund, runs an asset allocation
process in terms of
looking at how each individual
holding impacts the
overall portfolio and then
managing this on the
downside.
The advantage of running
a target return fund –
and what sets him and his
team apart from most asset
allocators – is that he starts
Insight’s multi-asset group funds – 3 years
15
10
5
0
-5
3m Libor
% -10
Diversified High
-15
-20
Income Fund
-25
-30
-35
Diversified Dynamic
Return Fund
Feb ’07 Aug Feb ’08 Aug
Source: Morningstar
Diversified Target
Return Fund
48 PORTFOLIO ADVISER [www.portfolio-adviser.com] MARCH 2010
Feb ’09
Aug
Feb ’10
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