investment viewpoints

All Roads: 5 years of growth

All Roads: 5 years of growth
Aurèle Storno - Chief Investment Officer, Multi Asset

Aurèle Storno

Chief Investment Officer, Multi Asset
Alain Forclaz - Deputy CIO, Multi Asset

Alain Forclaz

Deputy CIO, Multi Asset

 

Need to know

  • Celebrating its 5-year anniversary, LO Funds – All Roads Growth focuses on capturing higher risk-adjusted returns across various environments, adapted to an investor’s appetite for risk1

  • This multi-asset growth strategy has delivered a solid annualised 6.8%2 return at a fraction of the drawdown incurred by other growth multi-asset strategies. 

  • As macroeconomic uncertainty rises, we believe adopting an agile and adaptive approach to investing helps optimise an asymmetric return profile that captures upside opportunities while mitigating downside risk.

Stable returns using liquid assets

How could a multi-asset portfolio weather bumps along the road while simultaneously capturing compelling returns? The All Roads suite of multi-asset funds was designed to do exactly that: aim to provide stable returns across market cycles using liquid investments.

Launched in February 2017, the LO Funds - All Roads Growth fund put the emphasis on a more ambitious approach to risk and return, aiming to generate higher performance (cash+7% target) commensurate with a greater risk profile1 than its sister strategies, All Roads Conservative and the original, balanced profile.

With EUR 3.1bn assets under management today across the All Roads fund suite, the growth strategy has produced what it set out to do five years ago, returning 6.8% annualised (corresponding to cash+7.1%) and a cumulative 38% since inception to end-January 20221. The drawdown for All Roads Growth of 13.4% was lower than our budget of 17.5%, while our Sharpe ratio of 0.9 was on target for the 0.7-1.0 we envisaged.

 

Diversification and liquidity

The fund’s return compares favourably to other growth-oriented multi-asset funds over the same period, but achieved its results with a fraction of the risk.

 

All-Roads Growth

Bloomberg EU 60/40 index 

Annualised return

6.8%

5.7%

Volatility

8.2%

10.6%

Maximum drawdown

13.4%

25.7%

Source: LOIM, Bloomberg. Refers to performance from inception to 31 Jan 2022, net of fees. For illustrative purposes only. Past performance is not a guarantee of future returns. The ticker for the Bloomberg index is BMAEUR64.

 

How did we accomplish this? By sticking to our principles of diversifying investments across asset classes and using an agile and adaptive approach.

To us, a growth multi-asset fund should not blindly invest 60% (or more) in equities as many other funds do. Instead, we put the emphasis on diversifying sources of return as well as all aspects of the investment process. Liquid instruments are prioritised because we rebalance the portfolio actively and methodically to consider changing market hazards and meet pre-defined risk limits, rather than targeting static weights.

 

A systematic approach

At its core, our approach is deliberately systematic. We believe in removing the emotional element from investing by relying on a disciplined and rules-based investment style that separates emotions from investment decisions. This helps us follow a game plan based on risk limits even if events turn out differently than anticipated.

Once the portfolio is constructed, the allocation to each asset class is actively managed, depending on how risks evolve. As such, we react constantly to short-term, tactical signals with marginal and progressive calibration. This lends flexibility to the process and ensures the portfolio is adapted to the current environment.

 

Weathering disruptions and uncertainty

What bumps have been encountered along the way? Over the past half-decade, All Roads Growth has focused on obtaining higher risk-adjusted returns in different, and sometimes difficult, market contexts. For instance since launch, the fund has successfully weathered major disruptions such as the equity downturn in 2018 and the turmoil accompanying the Covid pandemic in 2020.

Throughout such periods of unforeseen and pronounced drawdown, All Roads Growth has managed to deliver on its objectives by holding a diversified exposure at all times, avoiding losses through actively managing drawdowns and benefiting from positive returns from insurance strategies.

  • Diversification: Our foundational principle is to be invested across asset classes. During the Covid-19 crisis, for instance, this meant that our exposure to sovereign bonds helped add to performance as these bonds rallied.
  • Drawdown management: This technique means that during periods of extreme volatility, we reduce exposure and resort to cash investments in order to avoid losses. Staying in cash helped cushion All Roads Growth from downside3.
  • Insurance strategies: We invest in a basket of long- volatility strategies on rates and equities. This paid off nicely in March 2020 and meaningfully shielded the portfolio.

 

Going forward, the macroeconomic environment presents considerable uncertainty. Amid mounting inflation, central banks are removing monetary stimulus yet the outlook for growth and a potential ‘policy mistake’ remain concerning. An attentive and agile approach is well-suited to helping investors tackle the risks arising from such an environment while maintaining a stable return target.

Tailored to investors who prize steady returns and a higher appetite for risk, All Roads Growth has spent five years delivering on its objectives. We believe the present investment context bodes well for that to continue.  

 

To discover more about the All Roads strategy, please watch our video: 

sources.

 1. Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk.
  2. Refers to fund performance as at 31 January 2022, net of fees for share class EUR NA. Past performance is not a guarantee of future returns.

 

 

important information.

For professional investors only

The Fund is authorised and regulated by the Luxembourg Supervisory Authority of the Financial Sector (CSSF) as a UCITS within the meaning of EU Directive 2009/65/EC, as amended. The management company of the Fund is Lombard Odier Funds (Europe) S.A. (hereinafter the “Management Company”), a Luxembourg based public limited company (Société Anonyme SA), having its registered office at 291, route d’Arlon, L-1150 Luxembourg, authorized and regulated by the CSSF as a Management Company within the meaning of EU Directive 2009/65/EC, as amended. The Fund is only registered for public offering in certain jurisdictions. The management company of the fund may decide to terminate the arrangements made for the marketing of the Fund. The articles of association, the prospectus, the Key Investor Information Document, and the subscription form are the only official offering documents of the Fund’s shares (the “Offering Documents”). They are available on http//www.loim.com or can be requested free of charge at the registered office of the Fund or of the Management Company, from the distributors of the Fund or from the local representatives as mentioned below.

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Important information on performance

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