This is a financial promotion for The First Sentier Multi-Asset Strategy. This information is for investors in the UK and EEA and elsewhere where lawful. Investing involves certain risks including:
- The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.
- Currency risk: the Fund invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the Fund and could create losses. Currency control decisions made by governments could affect the value of the Fund's investments and could cause the Fund to defer or suspend redemptions of its shares.
- Emerging market risk: Emerging markets tend to be more sensitive to economic and political conditions than developed markets. Other factors include greater liquidity risk, restrictions on investment or transfer of assets, failed/delayed settlement and difficulties valuing securities.
- Derivative risk: derivatives are sensitive to changes in the value of the underlying asset(s) and/or the level of the rate(s) from which they derive their value. A small movement in the value of the assets or rates may result in gains or losses that are greater than the amount the Fund has invested in derivative transactions, which may have a significant impact on the value of the Fund. .
- Credit risk: the issuers of bonds or similar investments that the Fund buys may get into financial difficulty and may not pay income or repay capital to the Fund when due.
- Interest rate risk: bond prices have an inverse relationship with interest rates such that when interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall.
- Charges to capital risk: The fees and expenses may be charged against the capital property. Deducting expenses from capital reduces the potential for capital growth
For details of the firms issuing this information and any funds referred to, please see Terms and Conditions and Important Information.
For a full description of the terms of investment and the risks please see the Prospectus and Key Investor Information Document for each Fund.
If you are in any doubt as to the suitability of our funds for your investment needs, please seek investment advice.
We invest for purpose
Markets are constantly moving – and when conditions change investors must rethink their asset allocation: that is the different types of investments held within the portfolio
Our flexible and dynamic approach draws on opportunities from across global markets to meet the investment objectives of our clients.
Research demonstrates that a significant portion of returns can be attributed to asset allocation decisions, through well-timed investments in the best performing assets for the prevailing market environment. By looking across all asset classes, our fund managers are able to find the most attractive potential returns given the risks involved - returns not typically achievable by investing in a single asset class.
Why invest in the First Sentier Diversified Growth Fund?
Here at First Sentier Investors, we invest with purpose. We seek to balance the trade-off between trying to meet the Fund’s performance target and the chance of capital losses. This is what we call objective based investing – combining the benefits of long-term asset allocation with dynamic short-term adjustments to our investments across different asset classes to potentially enhance returns and manage the risks involved.
The fund aims to protect against inflation and provide capital growth by achieving a positive return of 4% before fees and charges in excess of UK Retail Price Index (RPI)* over a rolling five year period – although this is not guaranteed.
Unlike traditional multi-asset portfolios, there is no requirement to allocate to any particular investment type. We only invest in opportunities that offer the best potential returns for investors given the risk involved, blending assets across the full spectrum of equities*, bonds*, currencies and commodities* that have the highest likelihood of delivering on performance targets.
By dynamically shifting exposures, we aim to take advantage of short-term investment opportunities as they arise. History has shown that being dynamic, making well-timed changes to the investment mix, can have a positive influence on long-term performance.
Our asset allocation moves with markets
The foundation of our portfolios, our Neutral Asset Allocation process, takes a longer term view on economies, markets and expected returns across asset classes. While the Neutral Asset Allocation alone will typically be the dominant driver of returns, there is also opportunity to mitigate portfolio risks and generate additional returns as market conditions change. We supplement the longer term Neutral Asset Allocation with our Dynamic Asset Allocation approach, which exploits shorter-term market inefficiencies.
What exactly is the Neutral Asset Allocation or ‘NAA’?
The Neutral Asset Allocation is the mix of investments that we believe has the highest likelihood of achieving a given portfolio’s long-term objectives.
The first step in our investment process is to determine the economic outlook, both globally and for individual countries.
We start with what we believe is the current fair value of our underlying assets and then we assess key economic variables like GDP growth and inflation, amongst others, which we use to calculate expected returns.
We then select what we believe is the best blend of assets, taking into account any risks, to generate the NAA. All this is done to give us the best chance of meeting the Fund’s objective.
The term ‘neutral’ is used as the ultimate portfolio needs to be supplemented by our shorter-term market views, which are generated through Dynamic Asset Allocation.
The Neutral Asset Allocation and Dynamic Asset Allocation come together to form a portfolio with the highest chance of delivering on the investors’ objectives:
- Domestic equity
- Global developed market equity
- Global emerging market equity
- Global bonds
- Domestic bonds and cash
What exactly is the Dynamic Asset Allocation or ‘DAA’?
Dynamic Asset Allocation or ‘DAA’ is where we take into account shorter-term market conditions.
By adjusting portfolio investments, DAA has the potential to deliver additional returns and help mitigate portfolio risks through protection strategies (such as the use of derivatives*), thereby maximising the probability of meeting portfolio objectives.
As long-term investors, and fundamental to our investment philosophy, we believe that markets are not completely and globally efficient - considerations such as the ease of trading particular investments, regulatory constraints, and other nuances associated with local markets enables us the opportunity to exploit potential short-term inefficiencies.
A flexible and dynamic approach to asset allocation
The best way to demonstrate our flexible and dynamic is with a case study, let’s look at our exposure to corporate high yield bonds*.
The graph shows that before June 2015, in our assessment corporate high yield was not attractive enough - and by ‘attractive enough’ we mean that we would not be sufficiently compensated for the amount of risk taken. As such we did not invest. Our views started to change towards the end of Q3 2015, consequently we started increasing our investments in the portfolio to just over 15% over the next three quarters. As the attractiveness of High Yield, in our view waned, we started to reduce and ultimately exit our investments in this area of the market. As markets moved in Q4 2018 our view on corporate High Yield changed again and we re-entered our investment positions.
Where does an objective-based fund fit within a broader portfolio?
Investing in an objective-based multi-asset strategy with flexible investment ranges free your manager to deliver more consistent returns with less risk, but how can a fund that moves in - and out - of asset classes fit within your broader asset allocation?
Here are three ways an objectives-based fund can be used in your portfolio:
An objective-based strategy can be added to the equities segment of your portfolio with the aim of delivering 'equity-like' returns with lower volatility
Core or whole portfolio solution
Use your objectives-based strategy as a one-stop-shop for delivering on an overall portfolio objective - including outsourcing of asset allocation and governance.
An objective-based strategy could fall into the 'growth alternatives', 'defensive-alternatives', or 'absolute return'categories, depending on the fund.