ARTICLES

Our portfolios posted modest returns over the month as low equity allocations kept returns modest in the face of rallying equity markets. The market is fluctuating between inflation and growth concerns as the short-term outlook remains unknown.

We continue to believe that over the medium-term, inflation pressures will likely remain somewhat elevated compared with recent decades and that financial repression will be the preferred path forward for central banks (keeping yields lowish and positive inflation and asset pricing). This is because the alternative of a deflationary collapse is highly undesirable to policymakers. We expect it won’t be long (weeks or months) until policymakers signal a less hawkish stance towards markets feeling forced to do so in the face of political pressure, slowing economies and/or further economic crises.   Hence, we see the need for precious metals and selective commodities such as energy and resources allocations in portfolios. We are more interested in looking to increase risk asset positioning judiciously on any sell-off than selling after losses.

Our Cash Plus portfolio is defensively positioned, while our Short Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios and for shorter-term liquidity needs.    

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame. There is scope here to increase equity positioning in the coming months as opportunities present themselves.

Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers, which tend to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future). 

We are better positioned for inflation than many over the medium term as we hold meaningful weightings to ‘hard assets’ in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of selectively chosen value-adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies. 

We aim to remain astute and flexible, and highly risk aware in an ever-changing and potentially highly challenging investment climate. We continue to look to diversify the portfolios where appropriate and sensible.

Our portfolios declined over the month as stock markets and commodities both sold off aggressively. The market has become obsessed with recessionary concerns as central bank tightening remains aggressive into a slowing economy.

We continue to believe that over the medium-term, inflation pressures will remain somewhat elevated compared with recent decades and that financial repression will be the preferred path forward for central banks (keeping yields lowish and positive inflation and asset pricing). This is because the alternative of a deflationary collapse is highly undesirable to policy makers. We expect it won’t be long (weeks or months) until policy makers expose a less hawkish stance towards markets being forced to do so in the face of slowing economies and/or further economic crises. Hence, we see the need for precious metals and selective commodities such as energy and resources allocations in portfolios. We are more interested in looking to increase risk asset positioning judiciously on any sell-off than selling after losses.

Our Cash Plus portfolio is defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter term time periods than our longer duration portfolios and for shorter term liquidity needs.    

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame. There is scope here to increase equity positioning in coming months as opportunities present themselves.

Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers, who tend to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future). 

We are better positioned for inflation than many over the medium term as we hold meaningful weightings to ‘hard assets’ in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of selectively chosen value-adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies. 

We aim to remain astute, flexible and highly risk aware in an ever-changing and potentially highly challenging investment climate. We continue to look to diversify the portfolios where appropriate and sensible.

Our portfolios had some losses over the month as both bond and stock markets globally sold off. Inflationary concerns have the attention of the market with interest rate concerns front of mind. Central bank policy now poses a major risk to markets with the FED and other central banks reacting to inflation.

We remain concerned about the medium-term market and economic prospects, including the significant risk of inflationary pressures persisting, possible Central Bank policy mistakes, stagflation/recession, heightened geopolitical risks with possible further deterioration, ongoing challenges to real economic growth and deteriorating corporate profitability. Despite this, we still see elevated market valuations in part and are hence participating very selectively in risk assets. The greatest medium-term challenge for all portfolios is achieving returns without suffering unduly as markets derate with the reality of our fundamentals - challenged political and economic circumstances amidst high market valuations. We are seeking to mitigate risks such as these and inflationary pressures in part by avoiding the worst of the market exuberance and with meaningful alternatives, precious metals and selective commodities and resources allocations. We continue to see the need to have lower market risks, greater diversification and strong active management to produce acceptable risk/return trade-offs. 

Our Cash Plus portfolio is defensively positioned, while our Short Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios and for shorter-term liquidity needs.   

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame. Nonetheless, even here, we are being cautious currently and have lowered market exposures in recent months.

Our portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than a historical SAA approach which tends to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future). Although past performance is not indicative of future performance, our highly competitive results to date have provided some validation of our approach historically.

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value-adding alternatives (selectively chosen), along with precious metals exposures and greater weightings to real assets. We are better positioned for inflation than many over the medium-term as we hold meaningful weightings to ‘hard assets’ in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. 

We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate as we think good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations.

Our shorter-dated portfolios were down for the month as bond markets sold-off aggressively; however, our longer-dated portfolios performed strongly, in an absolute and relative sense, during difficult market conditions.

Supply chain issues caused by war and deglobalisation further stoked inflationary concerns have the attention of the market. Central bank policy now poses a major risk to markets, with the FED feeling forced to finally react to inflationary risks.

We remain concerned about the medium-term market and economic prospects, including the risk of inflationary pressures persisting, stagflation leading to possible recession and deflation. Further deterioration in geopolitical risks and escalating conflicts are significant concerns and exacerbate the ongoing challenges to real growth, sustainable profitability, and elevated market valuations. We are seeking to mitigate risks such as these in part by participating selectively in risk assets and avoiding the worst of the market exuberance, but also through holding meaningful alternative allocations, selective commodities and resources allocations, all of which have been very helpful of late. We continue to see the need to have lower market risks, greater diversification and strong active management to produce acceptable risk/return trade-offs. 

Overall, Dynamic Asset’s portfolios are designed to manage risk through sensible diversification where we focus on investing into a range of assets where the return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. In this way, we are much more forward-looking than the typical risk profile / SAA manager, which tends to be much more biased to what has happened historically, but which may be markedly different from the future.

Our Cash Plus and Short-Term portfolios are defensively positioned, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios to help meet shorter-term liquidity needs.    

Our medium and longer-term portfolios target CPI+ returns, which means we must participate in order to generate returns, but we do so judiciously as we manage risk with those longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher risk assets on the basis of our insights and research. Nonetheless, even here, we are being cautious currently.

We are better positioned for inflation than most as we hold meaningful weightings to ‘hard assets’ in different guises. We continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, poor government policies, and market interference continue to strangle real productivity growth for much of the economy, albeit nominal growth has markedly improved for now. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. Furthermore, we think good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations.

We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value-adding alternatives (selectively chosen), along with precious metals exposures and greater weightings to real assets. We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate.

Our portfolios were down modestly over the month despite the aggressive equity market sell-off with the invasion of Ukraine. This reflects our current defensive positioning to help protect capital.

Inflationary concerns also have the attention of the market with supply chain issues becoming more acute, particularly in areas affected by war, and wages pressures growing. Central bank policy now poses a major risk to markets with the FED perhaps feeling ‘forced’ to finally react to inflationary risks.

We remain concerned about medium term market and economic prospects including the risk of stagflation, inflationary pressures persisting longer than expected, recession and then deflation, geopolitical risks, ongoing challenges to real growth impacting sustainable profitability, and elevated market valuations. We are therefore participating very selectively in risk assets. The greatest medium-term challenge for any portfolio manager is achieving returns without suffering unduly as the reality of our fundamentals - challenged economic circumstances amidst high market valuations - becomes an issue again leading to potentially significant selloffs in markets. We are seeking to mitigate risks such as these by avoiding the worst of the market exuberance, diversifying with meaningful alternatives and selective commodities and resources allocations, all of which have been very helpful in recent months. We continue to see the need to have lower equity market risk, greater diversification and strong active management to produce acceptable risk/return trade-offs.

Dynamic Asset’s portfolios are designed to be diversified but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed.

Our Cash Plus portfolio is very defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter term time periods than our longer duration portfolios.  

Our more medium and longer-term orientated portfolios target returns and manage risk with longer term time periods in mind. The Wealth Builder’s larger risk tolerance gives us the most leeway to back higher risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame.

We are better positioned for inflation than most as we hold meaningful weightings to ‘hard assets’ in different guises and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, poor government policies and market interference continue to strangle real productivity growth for much of the economy, albeit nominal growth has markedly improved for now. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. In this way, we are much more forward-looking than a historical SAA approach which tends to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future). We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value adding alternatives (selectively chosen), along with precious metals exposures and greater weightings to real assets. Furthermore, we think good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations.

Our portfolios were mostly down over the month as bonds and equities markets sold-off.

Inflationary concerns have garnered the attention of the market with supply chain issues persisting and wages pressures growing. Central bank policy now poses the major risk to markets with the FED forced to react to inflationary risks as it appears to be “behind the curve”.

We remain concerned about the medium-term market and economic prospects, including the risk of stagflation, inflationary pressures persisting, recession and deflation, geopolitical risks, ongoing challenges to real growth and sustainable profitability, and highly elevated market valuations, and hence participating selectively in risk assets.

The greatest medium-term challenge for all portfolios is probably achieving returns without suffering unduly in future market crises as the reality of the fundamentals - challenged economic circumstances amidst high market valuations - becomes an issue again.

We are seeking to mitigate risks such as these and inflationary pressures in part by avoiding the worst of the market exuberance and with meaningful alternatives and selective commodities and resources allocations. We continue to see the need to have lower market risks, greater diversification and strong active management to produce acceptable risk/return trade-offs.

Our Cash Plus portfolio is very defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios.

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builders' larger risk tolerance gives us leeway to back higher risk assets based on our insights and research while still prudently managing risk over a longer-term time frame.

Dynamic Asset's portfolios are designed to be diversified but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons.

This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio's objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we are much more forward-looking than a historical SAA approach which tends to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future). 

We are better positioned for inflation than most as we hold meaningful weightings to 'hard assets' in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, poor government policies and market interference continue to strangle real productivity growth for much of the economy, albeit nominal growth has markedly improved for now.

This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. Furthermore, we think good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations.

We continue to be very concerned about high asset prices. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value-adding alternatives (selectively chosen), along with precious metals exposures and greater weightings to real assets. We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate.

Our portfolios all provided positive returns over the month. Inflationary concerns have risen in recent months with supply chain issues persisting and wages pressures growing. Central bank policy now poses the major risk to markets with the FED forced to react to inflationary risks as it appears to be “behind the curve”.

We remain concerned about medium-term market and economic prospects, including the risk of stagflation, inflationary pressures persisting, recession and deflation, geopolitical risks, ongoing challenges to real growth and sustainable profitability, and highly elevated market valuations, and are hence participating selectively in risk assets. We are seeking to mitigate risks such as these and inflationary pressures in part by avoiding the worst of the market exuberance and with meaningful alternatives, selective commodities and resources allocations.  We continue to see the need to have lower market risks, greater diversification and strong active management to produce acceptable risk/return trade-offs. 

We continue to look to diversify the portfolios where appropriate and sensible. 

Our Cash-Plus portfolio is very defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios.    

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher risk assets based on our insights and research while still managing risk prudently over a longer-term time frame. 

Dynamic Asset’s portfolios are designed to be diversified but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we are much more forward-looking than a historical SAA approach which tends to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future). 

We consider future scenarios actively and if there is a major regime shift - such as towards inflationary positioning rather than disinflation - our approach and portfolio is able to respond to this. (That said, the market outlook remains challenging for everyone currently, no matter what the approach). For example, and in particular, we hold meaningful weightings to ‘hard assets’ in different guises and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, poor government policies, and market interference continue to strangle real productivity growth for much of the economy, albeit nominal growth has markedly improved. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. Furthermore, we think good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations.

We continue to be very concerned about high asset prices. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value-adding alternatives (selectively chosen), discounted listed investment companies (selectively chosen and now more difficult to identify), along with precious metals exposures and greater weightings to real assets. We aim to remain astute, flexible, and highly risk-aware and are invested in liquid assets whose weightings we can adjust over time to respond to an ever-changing and potentially highly challenging investment climate.

Our portfolios provided reasonably good returns over the month in what was generally a weak month for markets, with the shorter duration portfolios being the exception with modest negative returns. All our longer duration and more diversified portfolios provided positive returns as we benefited from our diversification.

In recent months, inflationary concerns have risen, with supply chain issues persisting and wages pressures growing. Central bank policy now poses the major risk to markets should the FED be forced to react to inflationary risks as it appears to be “behind the curve”.

We remain concerned about the medium-term market and economic prospects, including the risk of stagflation, inflationary pressures persistently, deflation without further stimulus, geopolitical risks, ongoing challenges to real growth and sustainable profitability, and highly elevated market valuations, and are hence participating selectively in risk assets. The greatest medium-term challenge for all portfolios is achieving returns without suffering unduly in future market crises as the reality of our challenging economic circumstances becomes an issue again.

We are seeking to mitigate risks such as these and inflationary pressures in part by avoiding the worst of the market exuberance and with meaningful alternatives and selective commodities and resources allocations. We continue to see the need to have lower market risk, greater diversification and strong active management to produce acceptable risk/return trade-offs.  

Our portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we are much more forward-looking than a historical SAA approach which tends to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future). We consider future scenarios actively, and if there is a major regime shift - such as towards inflationary positioning rather than disinflation - our approach and portfolio should be much more effective than the average. That said, the market outlook remains challenging for everyone currently, no matter what the approach.

Our Cash Plus portfolio is very defensively positioned, while our Short Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios.

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind.

Overall, we consider that extraordinary monetary and fiscal stimuli have been implemented by central banks and governments, creating distortions through market interference. The sheer size and extent of their actions are providing meaningful impacts on market returns and, in many cases, causing substantive dislocations from underlying company and economic fundamentals.

Over time, we expect these policies to be very supportive for certain portfolio positions and require dynamic management of others. For example, and in particular, we hold meaningful weightings to ‘hard assets’ in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, poor government policies, and market interference continue to strangle real productivity growth for much of the economy, albeit nominal growth has markedly improved.

This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. We think good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations.

We continue to be concerned about asset prices. We believe growth outcomes, geopolitical tensions and other risks and shocks pose further (unanticipated) risk to markets, potentially just as coronavirus has continued to surprise. We hence think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value-adding alternatives (selectively chosen), discounted listed investment companies (selectively chosen and now more difficult to identify), along with precious metals exposures and greater weightings to real assets.

We aim to remain astute and flexible, and highly risk-aware, and are invested in liquid assets whose weightings we can adjust over time to respond to an ever-changing and potentially highly challenging investment climate.

Our portfolios provided disparate returns over the month, with the shorter duration portfolios affected by poor market conditions for bonds and cash – which were challenged by inflationary surprises.  Our longer duration and more diversified portfolios provided positive returns as our inflationary positioning benefitted the portfolios.

Inflationary concerns have risen in recent months with supply chain issues persisting and other inflationary issues growing.  The bond market has become concerned about inflationary pressures challenging unsustainable central bank policy, along with the risk of another economic slowdown.

We remain concerned about medium-term market and economic prospects including the risk of stagflation, inflationary pressures persistently, deflation without further stimulus, geopolitical risks, ongoing challenges to real growth and sustainable profitability, and highly elevated market valuations, and are hence participating selectively in risk assets.  The greatest medium-term challenge for all portfolios is probably achieving returns without suffering unduly in future market crises as the reality of our challenged economic circumstances becomes an issue again.   We are seeking to mitigate risks such as these and inflationary pressures in part by avoiding the worst of the market exuberance and with meaningful alternatives and selective commodities and resources allocations. 

We continue to see the need for strong active management to produce acceptable risk/return trade-offs. 

We continue to look to diversify the portfolios where appropriate and sensible.  We continue to believe some meaningful exposure to assets such as precious metals are essential as a hedge to navigate the coming months if governments continue to provide massive stimulus and inflationary pressures continue.  Our non-consensus position here has begun to be rewarded again in recent times.  We note that economic and political risks remain very elevated globally with a real risk of future conflicts.

Our Cash Plus portfolio is very defensively positioned, while our Short Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios.   

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind.  The Wealth Builder’s larger risk tolerance gives us the most leeway to back higher risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame; it is in many ways a flagship portfolio for DAC and has – along with our other portfolios - proven highly competitive with both liquid retail and institutional portfolios of a similar nature.  Active management in general has become more productive since COVID, despite large flows to more passive instruments.

DAC’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons.  This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed.  In this way, we are much more forward-looking than a historical SAA approach which tends to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future).  We consider future scenarios actively and if there is a major regime shift - such as towards inflation rather than disinflation - our approach and portfolio should be much more effective.  That said, the market outlook remains challenging for everyone currently, no matter what the approach.

Extraordinary monetary and fiscal stimuli have been implemented by central banks and governments, creating distortions and market interference.  The sheer size and extent of their actions is providing meaningful impacts on market returns and, in many cases, causing substantive dislocations from underlying company and economic fundamentals.  Over time, we expect these policies to be very supportive for certain portfolio positions and require dynamic management of others.  For example, and in particular, we hold meaningful weightings to ‘hard assets’ in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile.  We believe large and unsustainable debt burdens, poor government policies and market interference continue to strangle real productivity growth for much of the economy, albeit nominal growth has markedly improved.  This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent.  Furthermore, we think good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations.

We continue to be concerned about asset prices.  We believe growth outcomes, geopolitical tensions and other risks and shocks pose further (unanticipated) risk to markets, potentially just as coronavirus has.  Indeed, it may take a market shock to end the current market rally given many investors appear to have become entirely valuation insensitive in the face of massive stimulus.  We hence think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value-adding alternatives (selectively chosen), discounted listed investment companies (selectively chosen and now more difficult to identify), along with precious metals exposures and greater weightings to real assets. 

We aim to remain astute and flexible and highly risk-aware and are invested in liquid assets whose weightings we can adjust over time to respond to an ever changing and potentially highly challenging investment climate.

Our portfolios provided relative defensive outcomes for the month as most markets suffered relatively meaningful losses.

With reopening now imminent, inflationary concerns have risen in response to past excessive degrees of stimulus. The bond market is becoming a little more concerned about inflationary pressures, and the risk of another economic slowdown as the prospects of central bank tapering looms.

We remain concerned about medium-term market and economic prospects including the risk of stagflation, deflation without further stimulus, geopolitical risks, ongoing challenges to true corporate profitability, and highly elevated market valuations. We are hence participating very selectively in risk assets. The greatest medium-term challenge for all portfolios is probably achieving returns without suffering unduly in continuing market crises. We are seeking to mitigate risks such as these and inflationary pressures in part by avoiding the worst of the market exuberance and with meaningful alternatives and selective commodities and resources allocations. We continue to see the need for strong active management to produce acceptable risk/return trade-offs. 

We continue to look to diversify the portfolios where appropriate and sensible. We continue to believe some meaningful exposure to assets such as precious metals are essential as a hedge to navigate the coming months if governments continue to provide massive stimulus and inflationary pressures continue. We note that economic and political risks remain very elevated globally with a real risk of future conflicts.

Our Cash Plus portfolio is very defensively positioned, while our Short Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios.   

Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us most leeway to back higher risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame. Active management in general has become more productive since COVID, despite large flows to more passive instruments.

Dynamic Asset’s portfolios are designed to be diversified but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. 

Extraordinary monetary and fiscal stimuli have been implemented by central banks and governments, creating distortions and market interference. The sheer size and extent of their actions are providing meaningful impacts on market returns and, in many cases, causing substantive dislocations from underlying company and economic fundamentals. Over time, we expect these policies to be very supportive for certain portfolio positions and require dynamic management of others. For example, and in particular, we hold meaningful weightings to ‘hard assets’ in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, poor government policies and market interference continue to strangle real productivity growth for much of the economy, albeit nominal growth has markedly improved. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent. 

We also continue to be concerned about asset prices. We believe growth outcomes, geopolitical tensions and other risks and shocks pose further (unanticipated) risk to markets, potentially just as coronavirus has. Indeed, it may take a market shock to end the current market rally given many investors appear to have become entirely valuation insensitive in the face of massive stimulus. 

We believe good active managers will better be able to differentiate themselves and add value over the next few years, in part by being more nimble and able to differentiate between assets based upon their prospects in different economic circumstances and very disparate valuations. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of liquid value-adding alternatives (selectively chosen), discounted listed investment companies (selectively chosen and now more difficult to identify), along with precious metals exposures and greater weightings to real assets. 

We aim to remain astute, flexible and highly risk-aware and are invested in liquid assets whose weightings we can adjust over time to respond to an ever-changing and potentially highly challenging investment climate.