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Investment management
By Tim Townsend, of Alexforbes
INVESTING in financial markets always comes with some risk. Geopolitical tensions, faltering global growth and rising inflation, to name a few, have all impacted the markets in the past few years.
We cannot eliminate the risks brought about by market uncertainty, but the good news is that we can manage them.
While investing has no guarantees, diversification and the allocation of assets into various investment instruments – such as equities, property and cash, currencies and regions – can help reduce the overall investment risk of a portfolio and help smooth short-term market fluctuations. Diversification can also be applied at the asset-manager level and this is why we, at Alexforbes, are firm advocates of a multi-manager approach.
Multi-management is an investment approach that consists of combining several asset managers across different markets, asset classes, investment philosophies and styles of money management to help reduce risk and enhance investment returns. Multi-management can offer investors several potential benefits that, together, can contribute toward better investment outcomes.
Well-diversified portfolios generally produce more consistent and less volatile returns, keeping the risk of drastic changes in investment returns at a minimum. A multi-management approach provides an additional layer of diversification by allowing investors to benefit from the expertise of several complementary asset managers. If one asset manager struggles, the other managers should minimise the impact of its underperformance. This helps to produce smoother return streams over time, irrespective of market or economic conditions.
While multi-management sounds like a simple concept, the reality is that a lot of hard work goes on behind the scenes to build a well-diversified, multi-managed portfolio. To realise the full benefits of the multi-manager approach, choosing a provider with a well-thought-out process for identifying the right asset managers and a demonstrable capability of blending them together is key. Talk to Alexforbes to find out how our multi-managed approach can help make investing smoother and safer.
