Effective diversification for a changing world

As market conditions change, investors not only need to look beyond traditional asset classes, but also to be more flexible and dynamic in their asset allocation approach.

Until recently, fund managers had grown increasingly focused on benchmarks rather than investor outcomes. Labels such as ‘cautious’ or ‘defensive’ sometimes reveal little about what is going on beneath the surface of a fund’s headline.

The regulator responded and LGIM followed suit. It saw the need to match risk more closely to client requirements and sought to build its range to focus on outcome-orientated solutions.

In 2013, it built a nimble and dynamic fund range (Multi-Index), which uses the full range of its risk targets, while employing regular rebalancing to ensure they stay within these targets.

For Andrzej Pioch, fund manager in the Asset Allocation team, this played to the group’s existing strengths. The team runs over £50 billion* in assets and uses dynamic asset allocation in many funds as a way to deliver returns over time.