Key takeaways:
- Today’s total portfolio approach still relies on a static reference portfolio, so a fund’s risk drifts with markets. The next step is to start from a drawdown budget and manage total risk to it every day.
- What we see as a key advantage of the total portfolio approach is dynamic risk budget utilization – taking more risk when the opportunity set is rich, less when it isn’t, and knowing when to re-risk after losses.
- Compound returns should be a fund’s North Star: Long-horizon funds that plan for shocks can supply liquidity when volatility arises rather than be forced sellers. Managing this process requires quantitative talent, a crisis playbook, and a CIO who builds trust with the board.
Related insights
All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect. The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
Whilst Janus Henderson believe that the information is correct at the date of publication, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson to any end users for any action taken on the basis of this information.