The popularity of multi-asset solutions is clearly seen by the significant inflows finding their way into the sector. As can be seen from the chart below, based on global data, the multi-asset sector has attracted most inflows in 2015 so far.
Fund flows by strategy type
The Investment Fund
NN (L) First Class Multi Asset strives to meet clients’ need for an all-in-one investment solution that combines multiple investment objectives: capital growth, asset class diversification and limited downside risk. To achieve these objectives, we manage a diversified global multi-asset portfolio that dynamically allocates to the most attractive asset classes while limiting downside risk by using volatility and allocation constraints and a risk-aware investment approach.
The First Class Multi Asset fund targets a gross return of cash + 3% over a five-year period with a target volatility of about 5%. The fund has generated an annual return of 7.1% since its inception in October 2011 until the end of August 2015, far above its return target. The fund has achieved this result with only 4.3% volatility, resulting in a Sharpe ratio of 1.6. Over the last 12 months leading up to 31 August 2015, the fund returned 5.43%.
The Investment Team
The First Class Multi Asset fund is managed by three portfolio managers from NN IP’s award-winning Multi-Asset boutique: Ewout van Schaick, Niels de Visser and Mark Robertson. In the Multi-Asset boutique, 20 investment professionals, including economists, strategists, statisticians and portfolio managers, act as one team. The Multi-Asset boutique, headed by Valentijn van Nieuwenhuijzen, oversees about €24 billion (as of end of June 2015) in assets.
The team also produces NN IP’s weekly Houseview, which outlines our view of the world and the investment strategy implemented in our multi-asset portfolios. The portfolio managers are also supported by asset-class specialists from within the NN IP organization for the selection of individual bonds and stocks.
The Investment Process
Our multi-asset approach combines a strategic, or longer-term, portfolio with a tactical, more short-term, allocation. The strategic portfolio is aimed at capturing the long-term risk premiums on asset classes while mitigating downside risks due to unexpected shocks. The tactical portfolio is fully based on our short- to medium-term investment views and aimed at exploiting opportunities where they arise.
Choosing the strategic and tactical portfolio composition define the fund’s asset allocation and form the first two steps of our carefully designed investment process. Security selection and risk management are the last two steps.