The Multi-Asset Process | What we offer | Liontrust Asset Management PLC
Liontrust - Multi-asset

The Multi-Asset process

Target risk portfolios and risk-profiled multi-asset funds

Investment philosophy

Performance is usually and understandably regarded as a relative game. We believe many investors are making the wrong comparisons, however, for target risk portfolios and risk profiled funds.

Rather than review the performance of our target risk Multi-Asset portfolios against a myriad portfolios and funds across the market, we compare each one against the rest of the portfolios in the Liontrust range. This is to ensure each portfolio is achieving the following two objectives over the short, medium and long term:

  • Target the outcome expected by investors in terms of the level of risk, as measured by volatility, of each model portfolio. This can enable investors to match the appropriate portfolio to their desired risk profile. This is achieved through our Strategic Asset Allocation (SAA) that is reviewed annually.
  • Maximise the return for each model portfolio while still targeting investors’ level of risk. This is achieved through our Tactical Asset Allocation (TAA) and fund selection.

This means therefore that the higher the risk of the portfolio, the greater the potential for volatility, positive returns on the upside and losses in down markets.

The other key objective of our Multi-Asset portfolios in terms of performance is to strive to “win over the long term by not losing”. The Multi-Asset team achieve this by seeking to manage risk and limit losses in falling markets to enhance long-term returns within each risk target. This is allied to patient investing – focusing on the long term, ignoring daily market fluctuations, don’t panic and stay invested.


Investment process

To achieve these objectives, there are five stages to the investment process:

1. Strategic Asset Allocation (SAA)

The fund managers collate and analyse historical returns and volatilities of a range of asset classes, as well as their correlations with each other, to determine the SAA that should meet the volatility targets for each portfolio and fund over the long-term. The SAA is essentially the default asset allocation should the fund managers have no views about the relative attractiveness of different asset classes.

2. Tactical Asset Allocation (TAA)

The primary aim of the TAA is to increase exposure to an asset class when it looks cheap and reduce exposure when it appears expensive; the fund managers’ focus is on valuations rather than market timing. They believe it is important to supplement the long-term benefits of the SAA with the flexibility to take advantage of valuation opportunities in the shorter term.

3. Fund selection

The portfolios and funds hold a range of funds and fund managers, including active, passive and alternative investment strategies. The fund managers believe the key elements that should underpin fund selection are: investment process, fund manager experience, fund manager knowledge and fund manager incentive (including remuneration).

4. Portfolio construction

The fund managers want to ensure the underlying funds within the portfolios and funds are exposed to the segment of the market they feel has the most potential for outperformance while reducing unintended risk. Therefore, they consider how each holding interacts with each other in terms of correlation, risk and return to ensure the benefits identified at the holding and sector levels are not diversified away when grouped together at the fund level.

5. Monitoring, review and risk management

The Liontrust Multi-Asset team is given regular updates, including in-depth data, on the underlying funds to ensure they are being managed according to their stated objectives and investment processes. This includes attribution analysis to show the underlying funds do not experience style drift and remain within their stated risk parameters. The team gains access to the underlying fund managers to probe their thinking and evaluate their continued commitment.

Income generation and specialist multi-manager funds

The Liontrust Multi-Asset team also manages Income Generating Funds, which seek to deliver income that is stable but with the potential to grow while also offering scope for capital growth. They also offer a range of multi-manager funds that aim to meet a specific objective rather than a volatility target and are designed for advisers who want exposure to individual asset classes and/or geographies.

The investment process for these funds is the same – asset allocation, fund selection, portfolio construction, and monitoring and review – without volatility targets. 

Multi-Asset target risk portfolios

Multi-Asset portfolios

The Liontrust Multi-Asset Portfolio Services offer a broad range of target risk and actively managed model portfolios to meet most clients’ risk and return objectives. The portfolios are suitable for all types of investors, from basic to experienced.

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Multi-Asset funds

Multi-Asset funds

The team manages three ranges of risk-profiled multi-asset funds (Active, Blended and Passive), income generating funds and specialist funds. The funds are diversified by asset class, geographic regions and investment managers.

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John Husselbee
The Multi-Asset team

This is one of the most experienced and highly regarded multi-asset multi-manager teams in the UK market. Led by John Husselbee and comprising six investment managers, the team has more than 100 years of investment management experience between them. They manage target risk funds and portfolios, specialist funds and income generating funds.

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Shayan Ratnasingam

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The Multi-Asset team

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Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital.

Some of the Funds managed by the Multi-Asset Team have exposure to foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The majority of the Funds invest in Fixed Income securities indirectly through other collective investment schemes. The value of fixed income securities will fall if the issuer is unable to repay its debt or has its credit rating reduced. Generally, the higher the perceived credit risk of the issuer, the higher the rate of interest. Bond markets may be subject to reduced liquidity. Some Funds may have exposure to property via collective investment schemes. Property funds may be more difficult to value objectively so may be incorrectly priced, and may at times be harder to sell. This could lead to reduced liquidity in the Fund. Some also invest in non-mainstream (alternative) assets indirectly through other collective investment schemes. During periods of stressed market conditions non-mainstream (alternative) assets may be difficult to sell at a fair price, which may cause prices to fluctuate more sharply.

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

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