A risk-based approach to multi asset as caution prevails

As recession concerns intensify and the tragic consequences of the war in Ukraine unfold, risks are mounting all around. Such turbulent times amplify the need for resilience: one of the key performance drivers of our All Roads multi-asset strategy is a risk-based approach to investing. In the latest quarterly edition of Simply put we analyse how such an approach has added value over the past 10 years by dynamically managing downside risk. Key topics include:

• Deleveraged but still diversified. Our solutions have amassed a considerable layer of cash during the first two quarters as we lowered our market exposure. The overall market drawdown mechanically pushed us to disinvest; and our trend-following signals prompted further deleveraging amid the widespread weakness across liquid assets. Our remaining ex-cash exposure remains diversified, nonetheless. We enter Q3 with caution.
• Earnings risk ahead. Our macro analysis also proceeds with prudence: we find that earnings risk has not yet been priced into equity markets, yet our growth nowcasting indicator fails to see a recession for now. Some risks may be behind us, but there are also significant ones ahead. Will growth begin to slow already or are higher rates needed to put a brake on expansion? Our current allocation and exposure mean we are prepared.
• A flexible strategy with multiple uses. How can investors use the All Roads strategy? It suits a broad range of needs: an asset-class replacement, all-weather strategy or a liquid alternative investment. In the current context, the liquid alternative usage appears to be the most relevant.
• Risk-adjusted performance over 10 years. Finally, our quantitative research team delves into the world of Sharpe ratios and finds the realised performance of All Roads over time is extremely competitive.

For more, please download the Q3 issue of Simply put using the download button provided.

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