Our Investment Portfolio Approach

Our Investment Portfolio Approach

In this section we discuss our approach for strategic
and tactical asset allocation.
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How we are moving portfolios

How we
are moving portfolios

Take a look at our
Strategic & Tactical
Asset Allocation

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Translating our views into portfolio strategy

Translating
our views
into portfolios

Explore how we create a globally diversified investment strategy

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How we are moving portfolios
Strategic asset allocation
Anchors aweigh: Safe assets in a long-term portfolio

Government bonds and highly rated corporate bonds, traditionally viewed as anchors in portfolios, are no place to hide when yields rise at the same time that risk sentiment crashes.


Traditionally, government bonds and highly rated corporate bonds provided anchors in multi-asset portfolios, delivering an offset in times of equity market turmoil and a steady income stream. In a world of structurally depressed bond yields, however, neither is the case any longer. Government bonds still tend to provide ballast for portfolios, but their ability to offer protection has diminished along with lower yields.

The first quarter of the year was a case in point. The lift-off to a new rate hiking cycle for many major central banks caused a violent repricing in the bond market. The war in Ukraine weighed on risk sentiment, at least temporarily. It also had significant effects on Russian asset markets, including the exclusion of these assets from some indices (such as emerging market bond indices). Many bond markets sold off in tandem with equities, and in quite a few regions bond indices declined more than stocks. Safe government and highly rated corporate bonds were no place to hide.
Tactical asset allocation
Allocating for the later stages of the cycle

While the market impact of recent geopolitical events is temporary, the beginning of tighter monetary policy is likely to leave a more lasting mark.


The first half of 2022 was dominated by the war in Ukraine and the start of the Fed’s hiking cycle. Of the two – and notwithstanding the humanitarian tragedy – we think the latter will leave a more lasting mark on financial markets. In our tactical asset allocation, we held onto a moderate pro-risk stance as the conflict in Ukraine escalated. We believe geopolitical events cannot be tactically timed and tend to have a temporary impact on asset prices, as fundamentals ultimately reassert themselves. And fundamentals, in particular solid corporate earnings growth, still suggest that equities should outperform bonds over the months to come, especially as recent equity market weakness has left stock valuations considerably more attractive.

Meanwhile, the start of monetary tightening in the US marks the beginning of the final stage of the cycle. But that is not to say that equities cannot recover from their recent correction. Often equities and credit still outperform ‘low-risk’ asset classes at this stage, especially for as long as rising yields and elevated inflation make the alternatives (cash and bonds) unattractive, and signs of the next global recession are not imminent.


 

Translating our views into portfolio strategy
Creating a globally diversified investment strategy implemented through best-in-class vehicles to generate attractive risk-adjusted returns.
Investment strategy
Investment strategy

Creating a globally diversified investment strategy implemented through best-in-class vehicles to generate attractive risk-adjusted returns.


We construct portfolios for investors with different return objectives, risk profiles and time horizons. Our flagship portfolios are multi-asset strategies that seek to deliver attractive longer-term returns for a defined level of risk. Our investment process is guided by a philosophy that emphasises a global and sustainable approach.


Within our equity allocation, we prefer quality growth companies. We’ve adapted our strategic approach to fixed income to match today’s environment of structurally depressed yields by embracing higher-yielding products
that offer diversified sources of return. We have also included an exposure to gold. We implement our views through an open-architecture approach to fund selection (combining passive, active and systematic strategies) together with our in-house international direct-equity strategy.

Opportunities & Risks
Allocating for the later stages of the cycle

Capturing opportunities and navigating risks


We have outlined five key themes in this mid-year outlook that we believe will drive investment returns over the rest of 2022 and beyond. We are guided by these themes when actively managing portfolios as well as when positioning discretionary and advisory mandates.

The first call (‘when the going gets tough’) reiterates our preference for balance-sheet strength and free cash flow – both of which are key drivers of our allocation to direct equities in our US and European equity holdings that leverage the capabilities of our in-house direct equity team. Our view is that the regions poised to benefit the most with regard to the second call (‘reshoring, restoring and reassuring’) are those with the highest levels of free cash flow and that have been growing intangible assets over the past decade. This is most evident in the US and emerging markets – our preferred equity regions.
 

Our Investment Process
The pillars of our investment process

Quintet’s flagship portfolio is based on five factors that can improve performance and reduce risk.

 


Global
Your portfolio invests globally to incorporate a broader opportunity set to enhance returns and diversify risk.
 

Open architecture
We partner with the highest-quality asset managers from across the industry to deliver best-in-class solutions across the portfolio in our third-party fund exposure.
 

Multi-asset
By investing across different asset classes, we expose your portfolio to a variety of sources of risk and return to deliver a smoother risk and return experience over time.
 

Sustainability
We increasingly integrate our sustainable philosophy across the portfolio, incorporating an ESG framework in our selection process.
 

Quality Growth
In our direct equity allocations, we have a preference for companies that are underpinned by strong balance sheets that are delivering attractive levels and growth of return on invested capital.
 

 

Download the full report
The war in Ukraine, Covid-19, and Fed tightening are making the market outlook more uncertain. Read our mid-year Counterpoint investment outlook report to gain insights and understand how we interpret for you investment implications, in this changing world.

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