EUROPE - F&C Asset Management is "aggressively looking" at launching a new solution that combines global tactical asset allocation with liability driven investment, according to chief investment officer Tony Broccardo. "We're looking to have a product that is very tailored to work alongside the asset liability work that takes place because we believe an important area for discussion and research is how optimally you deal with the liability solution and the return solution," he said. "That is very customer specific, which I think is a new challenge, it's not a ‘one-size fits all'."
F&C currently manages more than £70bn of assets using GTAA for pension funds and insurance companies.
Broccardo said the firm was looking at how it could ”leverage the alpha” for clients both from a traditional point of view and through an overlay.
“I believe that GTAA in combination with liability driven investment can produce a total solution for clients,” he said. “It’s about making sure we’re not divorcing liability driven investment and return creation and I think the most appropriate potential product to help bring those together is GTAA with liability constraints.”
GTAA seeks to add value versus a given benchmark by overweighting attractive markets while at the same time underweighting markets that are overvalued.
F&C believes that the inclusion of GTAA by a pension fund in the portfolio can simultaneously improve scheme returns and control risk.
Broccardo added: “As an extreme, a pension fund may need to close its liability gap such that there is no room for GTAA. But in most cases, there’s a balance between closing down risk from a liability point of view, which tends to mean minimising interest rate risk in a portfolio, but at the same time, creating part of the portfolio to add value and it’s within that growth part of the portfolio that we think GTAA will get a decent slice of the value added proposition.”
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