Frequently asked questions
Why Insight for multi-asset investment?
Multi-asset investment has been a core part of Insight's business for many years: the flagship Insight broad opportunities strategy has been running for over 13 years. Our track record demonstrates that our managers have the skills and the experience to benefit from the investment opportunities, but also to control the risks, involved in multi-asset investing.
We blend the active management of directional risk across a wide range of asset classes, with sources of potential return that rely less on market direction. This is based on three broad principles: diversification, dynamic asset allocation and downside risk management.
Watch a video that explains: Insight's approach to multi-asset investment.
How do you allocate across different asset classes?
We allocate assets across equities, fixed income, real assets and what we call "total return strategies", to ensure our portfolios remain diversified at all times while aiming to add meaningful value through active asset allocation. Read about our philosophy and process, or watch our educational video, for more information.
Our asset allocation decisions are driven by three key factors:
Valuations: we make strategic assessments of the absolute value of asset classes based on our analysis of the long-term risk premia embedded within prices.
Economic environment: our proprietary analytical tools help us to understand how macroeconomic factors are likely to affect different asset classes.
Market positioning: over the short term, asset class returns can be influenced by market dynamics, including shifts in investor behaviour. Our structured approach helps us understand how behavioural biases may affect market positioning and hence prospective asset price movements.
We strongly believe that having wide flexibility in terms of managing the size of our allocation to different asset classes and strategies is vital to capture prospective returns and manage downside risk. For every asset class, our lowest possible weighting is zero, reflecting that we would not want to hold any asset where we expected negative returns.
We have the ability to invest in any market that can fulfil our core requirements on liquidity, transparency and costs. Our implementation options include directly investing in securities, passive or active strategies and derivative investments, including exchange-traded futures, exchange-traded funds, exchange-traded options and swaps.
How do the total return strategies in your portfolios aim to protect performance in the event of a market fall?
Our multi-asset portfolios aim to blend the active management of directional risk across a wide range of asset classes with sources of potential return that rely less on market direction. We assertively move our exposure towards asset classes we consider to have a favourable forward-return profile and away from those with the opposite characteristics. As a result, our exposure to individual asset classes can vary across a wide range and can be zero when we expect negative risk-adjusted returns.
Our total return strategies play an important role, as they incorporate investments which aim to generate returns that are independent of broad asset class performance. This means they have the potential to make money whether markets are rising or falling. Watch our educational video for more information.
What do derivatives add that I couldn't get from more traditional asset classes? Do they have an impact on the risks within your multi-asset portfolio?
Derivatives help us to manage risks across our multi-asset portfolios and enable us to implement our investment ideas more effectively.
The use of derivatives is an important aspect of managing multi-asset strategies. We use derivative instruments to hedge existing market exposures as part of efficient portfolio management, and in some cases, to achieve market exposures where none currently exists.
We also use derivatives to implement our total return strategies, which aim to generate returns that rely less on overall market direction. Watch our educational video for more information.
Derivative markets are frequently deeper and more liquid than the underlying cash markets and therefore can potentially allow faster, cheaper and less disruptive access to market exposure than via cash instruments. Insight's investment philosophy highlights the need to precisely target attractive risks in the portfolios and this targeting can often be better achieved through the use of derivatives.
It is important to note that the vast majority of the derivatives used in Insight's multi-asset portfolios are exchange-traded. If the team uses over-the-counter (OTC) derivatives, these are closely controlled and monitored by the team, and counterparty exposure is collateralised daily.
What risk controls are in place?
The strategy employs multiple layers of risk management. From an investment perspective this involves managing portfolio risk at three levels:
Aggregate portfolio level: we monitor portfolio risk using robust systems which provide an accurate picture of overall portfolio risk as well as a decomposition of risk among our positions. Aggregate portfolio risk is monitored in relation to the portfolio's target.
Asset class level: we have a proprietary risk management process, which allows us to manage the investment in accordance with conviction and tolerance for downside performance.
Individual investment level: we have an additional check via our daily position monitoring and attribution process, as well as our weekly governance meetings.
How transparent are the holdings?
We provide detailed information on current holdings and performance attribution across our multi-asset portfolios. These are available in our standard reporting materials. For professional investors, we can provide detailed information focusing on specific time periods or aspects of the portfolio: please contact us for more information.
As at 31 December 2018. Assets under management (AUM) are represented by the value of cash securities and other economic exposure managed for clients.
The value of investments and any income from them will fluctuate and is not guaranteed (this may be partly due to exchange rate fluctuations). Investors may not get back the full amount invested. Past performance is not a guide to future performance.
Derivatives may be used to generate returns as well as to reduce costs and/or the overall risk of the portfolio. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.
Investments in bonds are affected by interest rates and inflation trends which may affect the value of the portfolio.
The investment manager may invest in instruments which can be difficult to sell when markets are stressed.
Property assets are inherently less liquid and more difficult to sell than other assets. The valuation of physical property is a matter of the valuer's judgement rather than fact.