Asset allocation funds are adding value for investors during COVID-19 extreme market volatility

The benefits of GLC-managed asset allocation funds are many, such as the diversification of underlying holdings, including multiple asset classes in domestic and foreign markets, multiple active managers and investments in alternative asset class funds. 

But it’s during periods of extreme market volatility that the added advantage of the dual-level active portfolio management of the GLC-managed asset allocation funds really shines.

The value of dual-level active management during market volatility

Active management of the underlying funds

Each actively managed underlying fund within the asset allocation funds is backed by experienced portfolio managers who can focus on their specific areas of expertise. This means investors benefit, in real time, from the specialized experience and expertise of seasoned portfolio management teams to identify and respond to current market risks and emerging opportunities within each distinct area of the market. 

Active management of the top-level funds

At the top fund level, the portfolios are actively managed by GLC’s Global Multi-Asset Strategy team with a specific focus on both overall asset mix of the fund and the underlying-fund component weightings. This includes rebalancing measures and asset mix calls that:

  • Align with our strong commitment to ensuring the funds remain within their respective risk categorizations
  • Ensure the proper functioning and liquidity of the asset allocation funds for investors – whether they be in an accumulation phase and adding to the funds, or in an income phase and making regular withdrawals, and
  • Position the portfolio with both strategic and tactical asset mix adjustments that are responsive to today’s market conditions, but also position the portfolio to meet their long-term return objectives. 

Taking prudent, responsive action

Recently, with today’s unprecedented economic environment and extreme market volatility, we have adjusted how we allocate daily cash flows and are using discretion when rebalancing. We’re taking an approach that’s prudent, responsive to the current market environment, and likely to remain until the extreme market volatility subsides. We’re also maintaining a slight defensive position going into Q2 2020, with real estate providing some stability against our equity exposure while holding a neutral stance in fixed income. 

How are the asset allocation funds performing now?

During the first three months of 2020, when the shock of the COVID-19 pandemic hit hardest and markets experienced extreme volatility and dramatic losses in stock markets, GLC’s asset allocation funds performed well, with most of the funds comfortably outperforming their benchmarks and protecting investors from the full force of the equity market drawdowns. This strong performance during a time of extreme market volatility is a direct result of the value of the multi-level active management of these portfolios by GLC’s Global Multi-Asset Strategy team (of which Portfolio Solutions Group is part), the disciplined and experienced portfolio management of the underlying fund components, and the inclusion and prudent management of alternative asset class funds. 

Key take-aways for investors

  • Even during extreme market volatility, long-term investors in GLC-managed asset allocation funds are reaping the rewards of prudent, dual-level active management and the diversification benefits of a strategic portfolio construction that aligns with your clients’ risk-tolerance and/or time horizon.
  • The multi-level active management of GLC-managed asset allocation funds continues to deliver on their value of strong risk-adjusted returns and are helping to mitigate the full effect of this extreme market volatility.
  • This approach, including the inclusion of unique diversifying alternative asset class funds within the asset allocation funds, provides unique advantages to investors over the long-term – advantages that continue to be used extensively in some of Canada’s largest and most successful pension plans and endowment funds.

Copyright 2020 GLC. You may not reproduce, distribute, or otherwise use any of this article without the prior written consent of GLC Asset Management Group Ltd. (GLC).

This commentary represents GLC’s views at the date of publication, which are subject to change without notice. Furthermore, there can be no assurance that any trends described in this material will continue or that forecasts will occur; economic and market conditions change frequently. This commentary is intended as a general source of information and is not intended to be a solicitation to buy or sell specific investments, nor tax or legal advice. Before making any investment decision, prospective investors should carefully review the relevant offering documents and seek input from their advisor.