The low-growth, low-inflation and low-yield environment since the financial crisis has produced greater volatility in the financial markets, and has made it more challenging to generate consistent investment returns. A simple balanced portfolio no longer delivers the 10.5% returns it did 35 years ago. Since the pre-crisis peak, the average return on an investment has been 6.7%.
Whether you are the trustee of a pension plan, an insurance company looking after the retirement savings of millions of customers or an individual saver, you have an increased need for investment solutions that deliver particular outcomes. These outcomes typically involve a targeted investment return with dampened volatility.
It is the innovation, flexibility and depth of expertise that lies within active asset managers that makes them best placed to respond to these two trends. Sophisticated portfolio construction with appropriate asset diversification is needed to meet the investor's long-term financial objective, whether that is capital accumulation and protection for a company's defined benefit plan or steady income in retirement for an individual saver.
Against this backdrop, it is increasingly clear investors with both large and small balance sheets are looking for similar return characteristics. They want to see outcome-oriented, volatility-dampening investments, preferably with absolute return, where the returns map with the risks in their own liability profile.
Simply put, it's about the steady accumulation of wealth or the delivery of a retirement invoice.