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  • 11/09/2017

Risk Managed Diversity is a Potent Fund Tool



Risk Managed Diversity is a Potent Fund Tool


Franklin

Steven E. Moeller is a managing director for Franklin Templeton Solutions, responsible for developing and managing multi-asset, multi-strategy investment solutions for institutional and retail clients in the Asia Region. Mr. Moeller joined Franklin Templeton Investments in 1999. He has more than 25 years of investment industry experience in the areas of portfolio management, institutional investment consulting, asset allocation, quantitative analysis, product management, and product development. Prior to joining Franklin Templeton Solutions, Mr. Moeller was a managing director overseeing Institutional Product Management for Franklin Templeton Institutional. Before joining the firm, he held positions with PIMCO Advisors/Columbus Circle Investors, Bankers Trust Company and Wilshire Associates. Mr. Moeller holds a B.S. in Economics and an M.B.A. from the University of Wisconsin-Madison. He is a Chartered Financial Analyst (CFA) Charterholder.

Steven Moeller, Managing Director, Portfolio Manager with the FT Solutions group at Franklin Templeton, explains the unique characteristics of the firm’s multi-asset strategy, winner of the Best-In-Class award in the Multi-Asset Allocation category.

BENCHMARK: Investors are increasingly looking for new sources of return and ways of managing risk. Can you provide some comments as to your own experience of how investors are embracing the Multi-Asset concept?

Steven Moeller: Investors continue to seek out managers offering diversified asset class capabilities, including alternatives, managed within a defined multi-asset investment process. FT Solutions strategies leverage the global resources of Franklin Templeton Investments to deliver best-in-class, multi-asset solutions to our clients. Many investors are increasingly looking for investment solutions grounded in risk management and designed to meet specific financial outcomes. We believe client needs are unique and are best served by a portfolio solution that considers their individual goals and expected outcomes.

Our dedicated team of over 70 investment solutions professionals combines extensive capital market expertise and a deep commitment to client collaboration to deliver integrated solutions across multiple asset classes.

What are the characteristics of your fund management process and style that make this fund a compelling proposition for an Asian investor?

FT Solutions leverages the intellectual capital and investment expertise of more than 650 investment professionals across the Franklin Templeton complex. These include members of well-established groups including, but not limited to; Bissett, Franklin, Local Asset Management, K2 Advisors, Mutual Series, Real Asset Advisors and Templeton Equity groups.

FT Solutions portfolios are active in nature and designed to add value through tactical top down and bottom up security selection decisions:

  • Top-down Tactical Asset Allocation, through macroeconomic analysis of economic fundamentals and relative valuations help the team capitalise on global economic trends through active asset allocation in asset/sub-asset class, geography and investment style.
  • Bottom-up Strategy Selection, through detailed asset class manager research professionals, making use of a variety of investment tools from hedge funds, commingled funds, ETFs, direct securities and derivative instruments.

In which parts of the world and which sectors do you see the most meaningful opportunities?

Low inflation: Our indicators and analysis suggest that global inflation should remain subdued, encouraging a liquidity environment that may benefit equities.

Global accommodative monetary policy: In our view, global central banks are likely to maintain low short-term interest rates and continue to promote easy monetary policy in a variety of countries, which could further promote global economic expansion.

Divergent global growth: Divergence in regional gross domestic product (GDP) growth rates has created multi-asset investment opportunities, in our view. Economic cycle indicators suggest that we have not yet reached the peak of the market cycle in many regions.

A rising interest-rate environment in the US: We believe intermediate-term US interest rates should gradually increase amid an improving growth outlook, thus potentially marking an end to a prolonged fixed income rally.

How do you blend the different components of a multi-asset portfolio to maximise returns and minimise risk?

We believe that fundamental analysis of the business cycle is the primary determinant of our ability to add value in our multi-asset portfolios through tactical asset allocation decisions. In addition, rigorous due diligence and in-depth performance analysis of potential investments can further add value through active selection.

Risk is also a key input into the management of Franklin Solutions portfolios. The team utilises absolute and relative risk measures to analyse risk versus various factors related to the portfolio. This helps the team understand exposures within a portfolio and potential expected performance such as the portfolio’s reaction to commodity returns, interest rate changes, or a change in volatility, for example.

Can you provide an example of a core fund component that typifies the profile of your funds?

The FT Solutions team employs a disciplined, yet flexible, investment process which seeks to provide solutions that achieve custom objectives within the parameters identified by clients. This process involves a robust set of investment tools that will optimally include active managers, ETFs, Risk Premia, derivatives, and hedge funds; and seeks to identify strong uncorrelated sources of return while tactically allocating based on market, regulatory, geo-political, behavioural and other factors. We seek to add value from three sources: Long-term strategic asset allocation (up to a 7 year time horizon), Tactical Asset Allocation (6-12 month time horizons), and a rigorous Manager and Strategy Selection process. BM

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