This is done using two common approaches to asset allocation – strategic asset allocation ( SAA ) which is long-term focussed and tactical asset allocation ( TAA ) which aims to take advantage of shorter-term opportunities and investment strategies . Shorterterm being a 12-18 month view .
Asset managers have different styles , approaches and philosophies each of which will behave differently in different market cycles .
Diversification is a frequently discussed element of investing and having reflected on asset managers ’ differences , the ability to have a portfolio that is diversified across different asset managers as well as asset classes is a fundamental tenet of the multi-manager investment strategy .
As an investor , you have a desired outcome or goal and time horizon for each of your investments . The financial planning process identifies and determines an appropriate investment solution to meet both these and your risk appetite .
This technical and complex work is done by multi-manager portfolio managers on behalf of you as an investor , applying a consistent and thorough investment process on an ongoing basis including recalibration at points in time .
As an individual investor , the complexity of selecting a portfolio that meets all your objectives , while being maintained on an ongoing basis on your behalf is best met through multi-manager portfolios .
That is because portfolios that are built on multi-manager methodology add value by selecting and blending asset managers , as well as determining the suitable asset allocation to meet the desired investment outcomes or objectives of your portfolio .
The aim of manager selection is not to predict which managers are going to perform best in the immediate future but to invest with a combination of high-quality and experienced managers that will deliver a competitive return within an acceptable risk framework regardless of the economic environment .
Yes , this sounds complicated , but your financial planner will guide , advise and ultimately recommend the correct portfolio for your outcomes , while ensuring the review of your investment is taking place regularly to adjust should any changes occur in your circumstances .
At PPS Wealth Advisory we subscribe to multi-manager portfolio management bringing the necessary diversification , risk mitigation , asset allocation and asset manager blend to our members that within different cycles are best placed to meet our member outcomes and long-term performance . We believe this approach , combined with a long-term investment mindset puts members in a strong position to avoid the pitfalls of investing and achieve their return objectives over their investment horizons .
* Read David Crosoer , Chief Investments Officer at PPS Investments ’ s article Making sense of investment cycles on page 13 for a bigger view of the investment environment we find ourselves in .
Linda Sherlock
20