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With markets beset by weaker growth, high inflation and geopolitical uncertainties, the Portfolio Construction and Strategy team considers the potential benefits of an allocation to liquid, equity diversifying strategies, such as absolute return, capable of generating a return in both good times and bad.
This article is part of the latest Trends and Opportunities report, which outlines key themes for the next stage of this market cycle and their nuanced implications across global asset classes.
Harnessing volatility will be key for equity absolute return strategies when taking advantage of opportunities on the short and long side.
Source: HFR and Morningstar. Data as at 31 December 2022.
Global Bonds | Global Equities | Absolute Return | Portfolio 11 | Portfolio 22 | Capture of Port 2 vs Port. 1 |
|
---|---|---|---|---|---|---|
Lowest 5 year return | -2.38% | -4.49% | -4.33% | -1.01% | -0.52% | 51% |
Average 5 year return | 3.83% | 7.48% | 1.13% | 6.23% | 5.61% | 90% |
Highest 5 year return | 8.31% | 20.45% | 6.49% | 14.91% | 13.43% | 90% |
Source: Morningstar, analysis by Janus Henderson PCS. Data as at 31 December 2022.
Note: Table shows 5-year rolling annualised returns based on all 5-year periods from Jan 1990 to Dec 2022. Global Bonds = Bloomberg Global Aggregate TR USD; Global Equities = MSCI ACWI NR USD; Absolute Return = HFRX Absolute Return Index.
Footnotes
1Portfolio 1 = 60% Global Equities 40% Global Fixed Income
2Portfolio 2 = 50% Global Equities 40% Global Fixed Income 10% Absolute Return