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Diversity is the low hanging fruit in investing

02 September 2021 Nishaan Desai, Divisional Executive of Retail Investment Portfolio Management at Liberty
Nishaan Desai, Divisional Executive of Retail Investment Portfolio Management at Liberty

Nishaan Desai, Divisional Executive of Retail Investment Portfolio Management at Liberty

We all get swept up with the marvels of the technical details and marketing campaigns of the investments industry. Money never sleeps, and so news reports are filled with details on the percentage moves in different indices and assets, and we're bombarded by fund managers telling us why their fund is the best.

At the end of the day though, what matters to the ordinary investor is whether their investments will meet their expectations. This of course means healthy and consistent returns on their hard-earned money.

It's accepted wisdom that different investment strategies do different things and depending on when you measure them, some are more successful than others. So, let's take this thinking to the next level and say every strategy is successful at some point. With this in mind, if we used every strategy available, would we be more successful in the long run? Probably yes, though more likely with the right team who understand the right approach, by deploying these strategies in their correct context and timing.

This is the theory behind multi-strategy investing. It is an investment approach that combines a wide array of different investment styles and strategies by deciding which strategy should be overweighted or underweighted at a particular point in time, in order to improve the fund's risk adjusted returns.

On a practical level for example, many professional investors always get asked if they favour the stability of established industrial stocks or the generous returns of tech stocks whose profits come from the constantly emerging and rapidly changing possibilities of new technologies. I would say both are valid in their own different ways.

The main differences with a traditional approach are that a multi-strategy approach invests in a wider array of assets and strategies, and this approach isn’t tied to a particular philosophy or strategy.

For example, we hear of investment managers with a growth style, or value style, or those who favour an active approach or a passive one. The multi-strategy approach utilises all of these and blends them in different ways depending on the cycle in the markets so that investors get more consistent returns.

At Liberty the multi-strategy approach is well suited to our goals-based approach to investing. Clients and Financial Advisers can focus on the questions that are important to achieving their financial plans and set the high-level objectives for meeting those goals.

They can then leave the technical investment decisions to investment professionals whose full-time job is to take a broad view of market cycles and make investment management decisions. Whilst risk and uncertainty are part-and-parcel of investing, this approach should also provide more consistency in returns to investors.

Our advice philosophy and product suite are set up to match this approach, leaving the technical details to professional investment managers whose job it is to care about these details, and make the decisions that bring them to reality. For clients who want a bit more choice than this, well that is also available, but without losing sight of the overall objectives and goals.

Your Financial Adviser will be able to bring you closer to what this all means for your own portfolio, this kind of diversity will benefit not only your long-term financial goals, but also your ability to earn consistently.

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