Diversifying into assets that perform better during negative market shocks can help shift the odds in investors' favour should the unexpected actually happen, says RLAM head of multi-asset Trevor Greetham in this video interview.
Talking to Professional Adviser editor Julian Marr in the above video, Greetham (pictured) outlines how RLAM's Global Multi-Asset Portfolio (GMAP) fund range navigated what proved to be a turbulent first year after its launch in March 2016.
"When people say 'may you live in interesting times', we certainly had an interesting first year," he says, before noting the two big shocks of 2016 - Brexit and Donald Trump's election in the US -turned out to be positive for markets because they led to looser policy.
"When Brexit happened, the Bank of England moved towards cutting instead of raising interest rates," he explains. "In the US, the Fed refused to raise rates because of the Brexit risk and now Donald Trump is promising much looser policy.
"So, from an economic point of view, Brexit and Trump have both meant stronger growth in the short run - and that is why markets have been so strong."
Greetham adds that RLAM's multi-asset range has been overweight equities throughout this period, continuing: "We have used political shocks like Brexit and Trump - when the markets have wobbled - to buy rather than sell because the macro fundamentals matter most."
Another 'interesting' year?
Asked about the importance of diversification ahead of what could prove another challenging year for investors, Greetham stresses the way a portfolio is built is very important.
"You can try to react to events in certain ways and there are certain rules you can follow that help you to stack the odds in your favour," he says.
"With the GMAP funds, the fact we have included government bonds and commodities in our diversified mix means we have asset classes that are intended to do well during market shocks - as, of course, the shocks are not always positive."
He concludes: "We have constructed these portfolios for what we think is going to happen next - but we want things to be sitting there waiting for the unexpected. Diversification really matters."
To watch 'Multi-asset in retirement planning', please click here
To watch 'Grading multi-asset portfolios to match risk appetite', please click here
To watch 'Diversifying to counter market shocks', please click here
To watch ''Clocking' different stages of the economic cycle', please click here
Our weekly heads-up for advisers
'Pleased Unbiased has clarified'
The chairman isn’t answering his email
Reforms not enough
An economic cocktail