The Threadneedle Dynamic Real Return Fund sits in the Targeted Absolute Return sector and seeks a real return of inflation +4% gross of fees. A diversified fund has to be dynamic with the ability to manage different opportunities and risks as they appear, according to Toby Nangle.
Part of the manager's investment philosophy is being responsible for every position in the portfolio and being exposed to areas where future growth on earnings is visible. "We aim to blend the best ideas from around the world to deliver inflation plus returns for investors, but with controlled volatility," he explains.
On the rise
The rise of multi-asset solutions in recent years has been well documented and for good reason: years of easy monetary policy have resulted in high asset prices despite the fact that global corporate earnings have gone roughly sideways for ten years.
Nangle says: "By confining yourself to a particular local market, you are attaching yourself to the economic developments of that local geography, which might not always be the thing you want. The market in a particular geography can also be sector-skewed.
"As an extreme example, Nokia was a very successful global firm which at one point in 2000 represented around 70% of the market capitalisation of the Finnish stock market. Those investing passively in their home equity market are still waiting to recoup their losses seventeen years later. Similarly, Japanese domestic investors are waiting to recoup losses 27 years after the Topix peaked in 1989.
"One of the great things about the multi-asset style of investing is the ability of fund managers to capture individual high-risk, high-return investments and bring them together. And if the assets are poorly correlated, you'll get a much better risk-adjusted return at the portfolio level.
"Ultimately, a diversified portfolio requires the fund manager to ensure that the full portfolio is not just one trade implemented through a variety of asset classes."
Click here to read more about the Threadneedle Dynamic Real Return fund and how the manager assembles a diversified portfolio with a global multi-sector approach.