23.08 Liontrust MA Quarter In Review Q2 Literature (Single) - Flipbook - Page 7
Rebalancing our funds and portfolios
Earlier this year, we appointed Hymans Robertson (Hymans)
to calculate the SAAs for all our multi-asset solutions following
a detailed review. This ensures that the SAAs applied to our
portfolios is consistent with those of our funds and the eight
Liontrust risk profiles.
The funds
With regards to our Explorer, Blended and Dynamic Passive
fund ranges, there were significant changes to our target asset
allocations linked to our SAA review.
In our Blended and Passive Dynamic funds, equity allocations
were reduced across the board, mainly by cutting exposure to
UK and Japanese equities. Fixed income target exposure was
increased to varying degrees in risk levels three to seven, while
exposure to cash and the new alternatives category, which includes
global infrastructure, real estate investment trusts, gold and broad
commodities, was increased significantly in the two lowest risk
levels. Two new categories of short duration gilts and high yield
bonds were also added.
SAAs for the next decade, during which we expect the drivers of
successful investing will be different from those of the last 10 years.
This will require greater flexibility over asset allocation and access
to more asset classes.
As our previous portfolio SAAs were based on 10-year expectations
(now 15-year) and followed a similar bespoke risk profile approach,
there is not a dramatic change in the approach to the creation
of the SAAs, but the new ones do contain several enhancements
over their predecessors. For example, our partnership with Hymans
will provide the capability to create bespoke Liontrust features in
the portfolio design process. We continuously look to enhance
our SAAs to obtain a more accurate reflection of what our MA
portfolios can trade and we expect to extend this range to more
sub-asset classes. We will also have access to a greater suite of
asset classes and greater variability within the asset classes.
In our Explorer funds, the SAAs are calculated in-house but based
on Capital Market Assumptions provided by Hymans. The equity
targets were increased at the lower risk levels and trimmed in the
higher risk levels. Fixed interest targets, which also now include
short duration gilts and high yield bonds, were increased in the
lowest and higher risk levels but reduced in the mid-range funds.
Target exposure for the new alternatives category was increased in
all but the highest risk level, while the target for cash was reduced
significantly in the lowest risk level but kept at 2% for all other levels.
We undertook several changes to our target asset allocations
following the SAA review. We anticipate that the portfolios’ risk
profiles will be unchanged by these adjustments. At asset class
level, we have reduced our equity weights at the margin in the
lower-risk portfolios and increased them in the higher risk profiles.
Our fixed income weights have been increased in the lower
risk profiles but decreased in risk profile seven. We have exited
inflation-linked gilts and added to non-linked gilts. We have also
increased our exposure to high yield and sterling investment grade
corporate bonds, mainly funded by exiting emerging market debt
and convertible bonds. Alternatives have been increased in the
lower risk profiles but decreased in the mid-range portfolios. Cash
has been reduced across the board.
The portfolios
Historically we have calculated the SAAs for our WSS and MPS
in-house. While we were happy with our WSS and MPS SAAs, the
opportunity to harmonise with the MA funds and adopt an SAA that
is future-proofed was compelling. We want our solutions to have
In summary, while our SAAs are important, it is just the first step
in our multi-stage investment process, which also includes Tactical
Asset Allocation, portfolio construction, manager selection and
implementation. It is a robust and repeatable process that invests
for the long term and has been tried and tested over many years.
Liontrust Multi-Asset Funds and Portfolios Quarterly Report: Q2 2023 - 7
