US - California-based dynamic asset allocation specialist First Quadrant has launched a new investment strategy in the UK aimed at offering defined contribution (DC) plans a more diversified default option.
First Quadrant believes the Global Risk-Balanced Fund is the first UCITS vehicle of its kind in the UK and is aimed at improving the risk return profile of default fund options available by diversifying risk more equally across global developed and emerging equity markets, global sovereign bonds, TIPS, commodities and real estate.
The fund aims to balance risk as opposed to focus on the capital weighting of each asset class, an approach more commonly used by traditional diversified growth funds and balanced strategies. The firm claims the strategy can provide a more stable investment experience relative to existing UK default options.
The firm manages $18bn in the US but the fund is its first venture into the UK DC market. Partner Ed Peters said: "On average, 82% of members across UK defined contribution schemes rely on the default fund offering. Many default schemes have a disproportionately high allocation to equities and equity-like risks - in some instances as high as 100%. In our view, this heavy skew toward equities means DC default options are particularly prone to market shocks and performance uncertainty, when investors are more often than not, wanting a more balanced and predictable, risk assessed portfolio.
"With the rate of asset growth in DC schemes far outpacing those of defined benefit (DB) schemes, the Global Risk-Balanced Fund offers, what we believe to be, a more competitive and innovative default option in the DC market, and ultimately reflects one of the first tangible steps toward bringing institutional asset allocation strategies to DC investors."
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