Our philosophy and process
We launched the Insight broad opportunities strategy over 10 years ago in December 2004 and have a track record that predates the global financial crisis. The team has a transparent approach to investment that emphasises three core principles of diversification, dynamic asset allocation and downside risk management.
Diversification: we have the flexibility to invest across a broad opportunity set to generate returns and diversify risk. Investments in equities and bonds broadly aim to capture returns from rising markets, and investments in real assets and total return strategies are typically less tied to the performance of equity and bond markets. By combining these different asset classes and strategies, we aim to broaden our opportunity set and enhance diversification beyond that of traditional approaches.
Example investment allocation:
Dynamic asset allocation: we take a highly dynamic approach to asset allocation recognising that specific asset classes can behave in different ways at different points in economic and market cycles. We assertively move our exposure towards asset classes with 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.
Downside risk management: managing investment risk across our broad opportunities strategy requires thinking in multiple dimensions:
- At a portfolio level: to ensure appropriate levels of risk and diversification
- At an asset class level: including awareness of drawdown risk when running market directional exposure
- At an individual position or strategy level: to ensure that risk is not overly concentrated and that the potential downside in the event of extreme moves is within tolerance levels
We use a range of risk modelling systems to measure the overall level of risk and to estimate the contributions from each of the underlying asset classes and strategies. Underpinning the strategy are the controls provided by Insight’s multi-faceted approach to risk management, which incorporate supervision by different parties and sophisticated systems on a daily, weekly and monthly basis.
For more information on the investment philosophy behind the strategy, please consult the strategy profile.
Our multi-asset strategy investment process is guided by the ethos of flexibility, transparency and control. Our experience has been that adhering to these has enabled us to successfully navigate even the most challenging of market environments. The flexibility of our approach, specifically the broad opportunity set from which we choose our investments, allows our strategy to adapt to changing market conditions.
The transparency of our investment process allows us to constantly assess whether our investment tool kit is sufficiently robust or needs adjusting to capture new relevant market information. This transparency feeds through to our portfolio construction and performance attribution framework which is important in that it facilitates a high level of control enabling us to be confident in our ability to provide downside risk management.
We show a stylised summary of our multi-asset investment process below:
Team statistics as at 31 March 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 partly be due to exchange rate fluctuations). Investors may not get back the 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.
While efforts will be made to eliminate potential inequalities between shareholders in a pooled fund through the performance fee calculation methodology, there may be occasions where a shareholder may pay a performance fee for which they have not received a commensurate benefit.
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.
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