Being responsible for every position in the portfolio and being exposed to areas where future growth on earnings is visible is a core part of the manager's investment strategy.
Toby Nangle leads the Threadneedle Dynamic Real Return Fund which sits in the Targeted Absolute Return sector and seeks a real return of inflation +4% gross of fees. Fund returns have come from a broad range of investments rather than any one allocation.
"Through our Dynamic Real Return fund, we aim to blend the best ideas from around the world to deliver inflation plus returns for investors, but with controlled volatility."
The benefits of asset allocation have certainly become clearer to many investors over the past 10 to 20 years. Regulatory developments, along with the changes to pension's freedom and new hybrid products across equity, fixed income, and alternatives, have been pivotal in moving the focus for institutional fund management to multi-asset. And the growing interdependence of companies and national economies reflects a paradigm shift, requiring a global perspective to uncover and evaluate opportunities.
Nangle says: "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."
The next investment cycle
Despite some wobbles along the way, equity and fixed income markets have seen a prolonged period of performance over the past few years, the manager adds.
"We are currently focusing on the degree to which we're going to have nominal reflation coming through around the world. The market has um-ed and ah-ed about this but we are still firmly in the steady reflation camp. The areas of the world that should do well in this environment are Europe and Japan from an equity perspective.
"As we start to see nominal reflation, revenue should grow and operating leverage should boost profitability quite meaningfully. We're really pleased to see evidence coming through to support this thesis. We're looking for extremely strong profitability growth over a sustained period which will allow valuations for European equities to rise."
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.