Lombard Odier’s portfolio managers start with the strategic asset allocation they believe is most appropriate over an economic cycle. They then allocate assets between equities, bonds, cash and currencies, and add alternative asset positions, such as commodities or hedge funds, with the aim of improving risk-adjusted returns. The tactical allocation of portfolios is adjusted based on a number of factors that drive investment returns: absolute and historical valuation, relative valuation, correlation between assets, positioning in the economic cycle and market sentiment.
Past five trades implemented in euros balanced-risk profile portfolios
20 Jan ’16 Rebalanced the equity allocation to 45%
18 Dec ’15 Reduced the US dollar exposure by 5.3%
18 Dec ’15 Removed the currency hedge for Japanese equity exposure
8 Dec ’15 Increased the eurozone equity exposure by 2.5%
1 Dec ’15 Reduced the US dollar exposure by 2.5%
Five key funds
Delaware US Large Cap Value
This fund seeks to capitalise on discrepancies between estimated value and price, buying at times of excessive pessimism and selling at times of undue optimism. The team takes a long-term approach to value investing emphasising fundamental research and building a concentrated portfolio of 30-35 stocks with exposure across all 10 S&P 500 economic sectors. The managers have generated steady outperformance relative to their benchmark.
William Blair Global Leaders
This fund invests in high-quality companies from around the world with strong management teams and a competitive advantage that drives sustained growth. The team looks for companies with healthy margins, consistent earnings growth, low financial leverage and reasonable valuations. The overall portfolio tends to be well balanced across geographies and sectors. The strategy has generated long-term outperformance.
BlackRock Euro Short Duration Bond Fund
The fund is managed by a robust, disciplined and team-oriented process that draws on BlackRock’s global resources. It uses a broad range of uncorrelated strategies and employs an integrated risk management system, culminating in a highly diversified portfolio. Performance has been consistent as returns have mainly been generated via relative value strategies.
LO Funds Fundamental Equity Long/Short
Amid challenging market conditions, investors are considering solutions that can generate absolute returns with limited downside risk. The investment team believes that diversifying portfolio exposure with a move into equity long/short strategies is appropriate in today’s market. By employing a multi-portfolio manager approach, with sector specialisation, the strategy has outperformed the S&P 500 TR since inception with half the volatility of the index.
Lombard Odier Funds Golden Age
The team believes that companies targeting the ‘silver generation’ have an opportunity to grow faster than the broader market on a sustainable basis. Golden Age is a high-conviction global equity strategy, investing in companies that focus on the growing wealth and population of the 55-plus age group. Stocks are selected through a combination of rigorous bottom-up research and top-down analysis.
