While asset allocation is widely accepted as the most important step in portfolio construction, most asset managers devote inadequate time or resources to research in this area.
The volatility in equity markets in recent years has exposed the inadequacies of traditional ‘low maintenance’ multi-asset portfolios. Momentum combine unconstrained active asset allocation, specialist external managers (where Momentum believe in active management) and passive funds to create our multi-asset solutions.
Momentum believe genuinely active asset allocation has an important role to play in multi-asset portfolios to better protect investors against large draw-downs and increase long term returns.
The Momentum dynamic asset allocation process focuses on which risk assets to invest in and the overall allocation to risk assets within their portfolios. This can be used to offset some of the limitations of relying on diversification alone to reduce volatility.
Momentum review each asset class individually, instead of uniformly applying pre-defined approaches to all asset classes. Momentum analyse the level of exploitable inefficiencies and determine the appropriate level of active management for each asset class. Momentum focus their research efforts on inefficient asset classes, weighting these classes to arrive at their desired asset allocation at a total portfolio level.