Why invest?

Why invest across multiple asset classes?

In recent years, professional investors have begun to realise that markets are no longer as predictable as was once thought. To mitigate such uncertainty, the dVAM mulit-asset range consists of a variety of assets. Such variety can make a portfolio more stable, because if one asset starts to fall, another may rise and compensate for any losses. It can be hard to predict how the various assets will perform in any given year, so this approach maximises your chances of consistent returns.

How do the funds manage market unpredictability?

The dVAM multi-asset funds don’t just consider returns when selecting assets to invest in. They also seek to maintain a predetermined level of risk in each portfolio. Such an approach makes it much easier to predict how an investment is likely to perform.
That’s because, in any given year, it can be hard to foresee which asset class will deliver the best returns. In contrast, certain asset classes prove, over and over again, to be riskier than others.

Consequently, the investment team is able to create a much more predictable portfolio by allocating assets according to their expected level of risk rather than their expected level of return. That said, as risk and return are two sides of the same coin, a steady level of risk should generate a corresponding level of return.

By investing across five major asset classes, we have the flexibility to build portfolios that match clients’ needs, be they conservative or adventurous.

Fixed income

Fixed income investments are generally bonds – loans to companies or governments that generate regular interest payments. They are popular with investors who are prepared to accept lower returns for lower risk. Fixed income is often used to diversify a portfolio, although the dVAM Multi-Asset Active range users other diversifiers such as Absolute Return and Alternatives.

Equities

Equities are company shares traded on a stock market. A firm’s share price can fluctuate rapidly, so equities are a higher-risk investment than fixed income – but one that offers the potential for higher returns. The dVAM Growth portfolio is largely made up of equities, while our Cautious portfolio contains the lowest proportion of this asset.

Absolute return

Absolute return holdings are those that, over the long term display a low correlation to both equity and fixed income asset classes. Often these holdings are exposures capable of targeting absolute return through offsetting positions across and within asset classes. The target these exposures in a cost efficient, transparent way.

Alternatives

Alternative assets can bring further diversification and enhance returns to a portfolio by including in it investments such as property and commodities. All the dVAM portfolios contain some alternative investments.

Cash

Cash – for example, savings in your bank account – is generally safer than other assets. However, it usually offers much lower returns and its value may be eroded over time by inflation. All the dVAM portfolios contain some cash.