Portfolio Flexibility & Protection
Our experience with clients has shown us that investors are not only looking to fund managers to use their expertise to deliver excess returns, but are also looking for wealth protection when asset bubbles or unfavourable economic conditions present themselves. This belief has reinforced our tactical asset allocation approach which can result in portfolios holding an underweight position in an asset, or no allocation altogether, if an asset is not providing sufficient reward for risk.
The three VIP diversified portfolios – VIP Conservative, VIP Balanced, and VIP Growth – have been developed with flexible asset allocation constraints to allow the Investment Committee to hold underweight positions in growth assets, all the way to 100% Cash, at any time where unfavourable macro economic and market factors present themselves.
This is a very different proposition to that offered by our peers that aim to remain completely invested in all market conditions no matter how these conditions affect clients portfolios.
Strategic Asset Allocation
The VIP diversified portfolios are a constructed by combining the sector specific portfolios according to a Strategic Asset Allocation target.
These targets are as follows:
- VIP Conservative – 30% growth assets and 70% defensive assets
- VIP Balanced – 60% growth assets and 40% defensive assets
- VIP Growth – 80% growth assets and 20% defensive assets
This strategic allocation to asset classes is based on an investors risk tolerance.
Tactical Asset Allocation
The process then asks whether specific assets within the strategic allocation are providing sufficient reward for risk based on various factors ranging from asset specific factors to overarching macroeconomic factors. If these factors deem to present an unfavorable situation we will not only hold an unweighted position in the asset, but may have no allocation whatsoever.
In this way this over-arching Tactical Asset Allocation approach aims to protect investor’s wealth during times such as the Dot Com Crash or Global Financial Crisis.