EUROPE – The European asset management industry could well be moving away from traditional balanced portfolios to a new-type of balanced funds with elements of multi-management and specialisation, says Allianz Dresdner Asset Management (ADAM).
Speaking today at a press conference in London, Lee Thomas, director at ADAM, explained the new concept which has been exemplified in its new funds, ADAM Vision Funds, which invest 50:50 in global equities and European fixed income, and 50:50 in global equities and global fixed income.
The theory behind the concept is that no single style will produce value consistently - so diversification is the key to adding alpha.
Specialisation and multi-management comes into play, however, in that stocks will be picked by ADAM’s various specialist groups. As ADAM says, “Most successful investment firms are specialty boutiques, with a single style, but for consistency you need lots of boutiques.” As opposed to a multi-manager, ADAM will be in control of risk management internally, and asset allocation will be used sparingly.
The funds have a targeted out-performance of 200 basis points, and a targeted tracking error of 500 basis points.
Thomas referred to the concept as “new balanced”, and said that there could be a convergence towards it, with some consultants already mentioning a similar portfolio theory in their presentations.
Interest in the funds is expected to come from European institutions looking to revamp their current balanced portfolios.
Commenting on the new product, chief executive officer, Joachim Faber, said: “We are reacting to the downturn in investors’ appetite for risk and for specialist mandates and core-satellite structures.”
ADAM is Europe’s top asset manager according to this year’s IPE survey, managing over one trillion euros in assets. ADAM is comprised of specialist asset managers such as PIMCO, Dresdner RCM Global Investors, and Oppenheimer Capital, and is part of the Allianz Group.