The art of portfolio construction has changed – almost as much as client needs, according to Aviva Investors
Picture a forest. It's bursting with plant and animal life. There are towering tree-trunks overhead and tangled roots underfoot.
In the 18th century, European scientists tried to tame this natural abundance. They started clearing land to create artificial forests that could be cultivated cheaply and efficiently. They chose a single species of tree and planted the seeds in orderly rows.
But the result was a disaster. The trees rapidly died.
So what went wrong?
The scientists had overlooked what makes a forest resilient: its diversity.
This story could be a parable for modern fund management.
All else being equal, a globally diversified portfolio that encompasses a range of uncorrelated assets and strategies should prove more robust than a less-diversified alternative, especially during economic crises such as the fallout from Covid-19.
But a successful multi-asset fund is not just a random collection of different securities anymore. The art of portfolio construction has changed, just like client needs.
Click here to read our exclusive guide on multi-asset and how a new approach to investing and diversification is needed to manage the challenges of 2021.