Time to Reevaluate Multi-asset Investing The reputation of multi-asset investing, also known as global asset allocation (GAA) or global tactical asset allocation (GTAA) investing, has diminished undeservedly over the last several years. Some see it as a strategy that cannot deliver attractive returns. But that opinion rests on the misperceptions that: first, the performance of the average multi-asset manager is representative of the performance of all multi-asset managers; and second, weak performance by the overall universe of multi-asset managers will persist.
Investors should not concede this strategy for three primary reasons.
1. A small group of multi-asset managers with a truly tactical approach has generated benchmark-beating returns over periods as long as 10 years. Accordingly, investors who have been disappointed by a strategy’s results should consider adding a second multi-asset strategy that takes a different approach from their original multi-asset manager. They may also need to reconsider the role that the strategy plays in their asset allocation.
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2. Tactical multi-asset managers can play a role different from multi-asset managers’ traditional role of providing exposure to asset classes that plans could not access easily. Instead, they can potentially add value by emphasizing areas of the portfolio’s strategic asset allocation that are likely to do well over the short to intermediate-term. Plans and their consultants cannot move as quickly as a tactical manager. Thus, they should consider using a multi-asset manager for tactical reasons, rather than strategic reasons.
3. The recent increase in asset class return dispersion—a broader range of outcomes between asset classes—will likely favor these tactical multi-asset managers. The time is right for multi-asset investing skeptics to give this strategy a chance.
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