In this dynamic Q&A, Anthony Willis, investment manager and senior economist in the Multi-Manager team and Robert Plant, portfolio manager, Multi Asset, explain the different strategic and tactical approaches the group employs to find the best opportunities for investors.
Q1. The strategy has freedom across asset classes, geographies, and sectors. How does this unconstrained approach translate into a repeatable investment process?
Our approach is best characterised as ‘disciplined flexibility' within well-defined risk parameters rather than complete freedom. Each CT Universal MAP fund is managed to specific long-term volatility targets with asset class constraints.
We apply a three-pillar investment framework:
- Strategic Asset Allocation (SAA): Our quarterly SAA process combines quantitative optimisation with qualitative overlay. The optimisation incorporates volatility, correlation, and expected return inputs, delivering the best risk-adjusted returns within each fund's constraints.
- Tactical Asset Allocation (TAA): Tactical positions are sized according to conviction scores, with maximum positions limited by SAA constraints.
- Security Selection: We leverage in-house investment teams with defined tracking error budgets for each sleeve (e.g. 2-3% for global equities), ensuring disciplined alpha generation within risk parameters.
Q2. Where do your best ideas come from?
Our strongest investment ideas emerge from the intersection of data, expertise and collaboration:
- In-house specialist investment teams with deep expertise in specific markets
- Our collaborative multi-asset team discussions
- Our proprietary quantitative models that identify asset allocation opportunities
A recent example was our tactical overweight to emerging markets, initially proposed by our Valuation Research Group. EM equities typically thrive in a weakening dollar environment and benefit from rate cut headroom amid controlled inflation. Chinese fiscal stimulus and improving liquidity conditions added further support.
This positioning exemplifies our ability to identify opportunities across global markets by combining quantitative signals with fundamental insights from our specialist teams. The decision was implemented efficiently through futures contracts in the Universal range, allowing us to express this view in a cost-effective manner while maintaining our overall risk targets.
Read the article in our Focus guide with Columbia Threadneedle Investments.
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