Against a volatile market backdrop, “investing in multi-asset products is one of the most effective ways to enhance risk-adjusted returns’’, according to Matteo Germano, global head of Pioneer Investments’ €70 billion multi-asset strategies.
“We believe investors should consider increasing risk in their portfolios over the next six months but also diversify to manage potential risks.’’
Asset diversification by itself is not enough. He believes that informed dynamic asset allocation within an enlarged investment universe has the ability to maximise returns. Understanding risk and seeking to eliminate unwanted risk through active management may help mitigate the downside. Pioneer Investments has recently strengthened its multi-asset offering with a Target Income strategy, aiming to address the needs of investors who seek income but want to avoid concentration risk in one asset class. Germano states that income-generating strategies are a key growth area at Pioneer Investments.
Multi-asset products are expected to benefit as investors start rotating away from traditional fixed income products in search of more attractive yields. The asset class allows investors to aim to ramp up returns while simultaneously helping to manage associated risks of investing in higher yielding asset classes.
“Our disciplined risk management approach using dynamic draw-down management techniques as well as scenario-based stress testing helps us hedge appropriately against risks” says Germano. “Our proprietary risk budgeting framework allocates to strategies based on their risk contribution, leveraging on low correlations to optimise overall portfolio risk.”
To this effect, portfolio management works closely with a dedicated portfolio construction team who help them monitor and manage risks effectively. “Risk diversification is also achieved through diversifying across alpha sources.”
Combining strategies with different time horizons, balancing top-down macroeconomic views with bottom up security section and allocating across absolute return and relative return strategies can help achieve this.
Asset allocation is driven by Pioneer Investments’ experienced team of portfolio managers who collaborate with an extensive global research platform of 70 analysts to select the highest conviction ideas.
“We recognise the growing importance of alternative asset classes, such as infrastructure and real estate and aim to grow our presence in real assets through dedicated resources,” says Germano.
Over the next six months, Germano says, emerging markets are likely to slow down further given their deteriorating macroeconomic fundamentals. “We have downgraded our outlook for emerging markets, although we are optimistic on the prospects of developed markets,”
“The developed world is stabilising – Europe is exiting smoothly from the recession and the economic climate in the US is improving. However, we remain concerned about potential policy mistakes and a fragile labour market.”
DISCLAIMER: Unless otherwise stated, all information contained in this document is from Pioneer Investments and is as of 16/09/2013.
The investment schemes or strategies described in this document (the “Schemes”) may not be registered for sale with the relevant authority in your jurisdiction. Where unregistered, they may not be sold or offered except in the circumstances permitted by law. The Schemes and the services described herein may not be regulated or supervised by any governmental or similar authority in your jurisdiction. This material does not constitute an offer to buy or a solicitation to sell any units/shares of any Scheme or any services, by or to anyone in any jurisdiction in which such offer or solicitation would be unlawful or in which the person making such offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such offer or solicitation. The Schemes may not be offered for sale in the United States of America, or in any of its territories or possessions subject to its jurisdiction or to/for the benefit of a US Person.
Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. The content of this document is approved by Pioneer Global Investments Limited. In the UK, it is directed at professional clients and not at retail clients and it is approved for distribution by Pioneer Global Investments Limited (London Branch), Portland House, 8th Floor, Bressenden Place, London SW1E 5BH. Pioneer Global Investments Limited is authorized and regulated by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority (“FCA”) are available from us on request. For FundsEurope susbcribers only and not to be circulated to third parties or distributed to the public.
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Date of First Use: 24/10/2013
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