Generating income: Multi-Asset as a solution

Cédric Baron, Generali Investments, Head of Multi-Strategy Jean-Marc Pont, Generali Investments, Investment Specialist

Following the 2008 financial crisis, the asset management industry in Europe was characterised by a big increase in assets under management labelled as “Multi-Assets”. 2015 was again a “bumper” year in terms of net sales for these strategies (Multi-Asset being an investment strategy and not an asset class in itself) with an annual increase of 22.8% in total net assets across Europe. Multi-Asset strategies have become relevant in most European countries and we believe that this trend is here to stay.

The reasons behind the success of Multi-Asset strategies are manifold, trying to respond to differ- ent issues, whether related to market fundamentals (lower returns and yields, across asset classes), risk management (to avoid maximum drawdowns, contain volatility and/or reduce tail risks) or investment (flexibility, to capture different market opportunities).

Importantly, it also responds to some investors’ preferences: a smoother investment journey and some level of protection in falling markets, a rebalancing between riskier equities or to safer fixed income instruments, achieving real returns but with volatility lower than global equities or wanting positive returns regardless of market direction (absolute return).

Whatever the reason, economic cycles do impact the performance of the main asset classes – as illustrated in the chart above – while outperforming as- set classes constantly change within those cycles!

Diversifying via uncorrelated (or less correlated) sources of performances is, for Generali Investments, key to targeting and achieving medium/long term investment goals. Furthermore, efficient allocation becomes even more relevant with our current regime of low yields, lower returns and higher volatility.

Allocating across so many different asset classes therefore requires specific expertise and skills.

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