In a world where achieving returns with market beta alone is likely to be much more challenging, we believe it’s time to approach investment solutions differently. Explore how combining alpha building blocks in multi-strategy solutions can drive risk-adjusted outcomes for clients.
Investors benefited during the era between the 2008 financial crisis and the 2020 Covid pandemic from exposure to almost any risk asset – such was the pervasive impact of ultra-low interest rates and central-bank asset purchases. In the aftermath of that era, and without the support of highly accommodative monetary policy, we believe it will be much more challenging to achieve returns with market beta alone.
We believe in particular that asset managers can help asset owners navigate this more challenging regime by offering a range of multi-strategy solutions that are focused on achieving goals across market cycles by combining diversified and liquid alpha components with efficient risk management.
Diversified building blocks
At Newton, we do that by leveraging our multidimensional capabilities and bringing together a breadth of fundamental and systematic alpha building blocks in multi-strategy solutions in pursuit of optimal risk-adjusted outcomes for each of our clients.
Our multi-strategy portfolios invest in three distinct buckets: equity market neutral, macro relative value, and macro directional. The underlying components offer diversification across different market environments. They exist already and have track records of ten years or more. They can also incorporate a tail-risk hedging component as an extra layer of risk management with the goal of protecting against ‘left-tail’ events. The result is a range of holistic strategies, built to be resilient to changing market regimes.
Risk budget
We focus on providing clients with a smoother journey to meeting their investment objectives. That is why our strategies are built on our deep understanding of the many different risks that may interact to influence the path of portfolio returns. The risk budget is balanced across the underlying strategies in line with our macroeconomic forecasting and risk-based portfolio construction.
Ultimately, we seek to deliver the highest return for the risk taken. With today’s increasingly complex markets, our multi-strategy portfolios seek to address the risks that each client faces and balance them in a manner best suited to their requirements.
Conclusion
Allocating to strategies that have low correlation to equities and bonds can be a valuable portfolio construction tool with the potential to lower the volatility and soften the drawdowns of an overall portfolio while accumulating returns over the long run.
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Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.
Important information
For professional investors only. This is a financial promotion and has been issued by Newton Investment Management Ltd. ‘Newton’ and/or ‘Newton Investment Management’ is a corporate brand which refers to the following group of affiliated companies: Newton Investment Management Limited (NIM), Newton Investment Management North America LLC (NIMNA) and Newton Investment Management Japan Limited (NIMJ). NIMNA was established in 2021 and NIMJ was established in March 2023. In the United Kingdom, NIM is authorised and regulated by the Financial Conduct Authority (‘FCA’), 12 Endeavour Square, London, E20 1JN, in the conduct of investment business. Registered in England no. 01371973. NIM and NIMNA are both registered as investment advisors with the Securities & Exchange Commission (‘SEC’) to offer investment advisory services in the United States. NIM’s investment business in the United States is described in Form ADV, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request. NIMJ is authorised and regulated by the Japan Financial Services Agency (JFSA). All firms are indirect subsidiaries of The Bank of New York Mellon Corporation (‘BNY’).
Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell investments in those securities, countries or sectors. This material is provided for general information only and should not be construed as investment advice or a recommendation. You should consult with your advisor to determine whether any particular investment strategy is appropriate. Statements are current as of the date of the material only. Any forward-looking statements speak only as of the date they are made, and are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those anticipated in forward-looking statements. Some information contained herein has been obtained from third-party sources that are believed to be reliable, but the information has not been independently verified by Newton. Newton makes no representations as to the accuracy or the completeness of such information and has no obligation to revise or update any statement herein for any reason. Charts and graphs herein are provided as illustrations only and are not meant to be guarantees of any return. The illustrations are based upon certain assumptions that may or may not turn out to be true.
All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or strategy. It is only for sophisticated investors who can understand the risks associated with the solutions described and may not be appropriate for other types of investors. There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market and should seek their own legal and financial advice. This material is only intended for and will only be distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.
