By Mike Brooks (pictured), Senior Investment Manager, Investment Solutions, Aberdeen Asset Management – What role do you want your DGF to play in your portfolio? Given the array of diversified growth funds available in the market, picking a diversified growth fund for your portfolio has never been easy. However, it can be made significantly easier by asking yourself the right questions.
The key question is: what role will the DGF play in your overall portfolio? Most DGFs have similar overall objectives but there are many different approaches available in the market. Do you require a diversified portfolio providing exposure to traditional and alternative asset classes or a single manager hedge fund-style strategy? Both have a place (and can sit neatly together) but you need to understand what the fund will bring to the portfolio.
Investors should also consider how easy it is to understand the investment approach. A transparent, understandable strategy enables investors to understand the portfolio and the opportunities and risks it will bring. This is particularly key for pension plans who wish to use a DGF as a governance solution for their growth portfolio.
Although there are numerous strategies many market participants have split the DGF universe into two distinct groupings. The first is ‘Hedge Fund-lite’ global macro style funds, which adopt complex investment tools and techniques. These funds largely rely on manager skill through significant use of relative value strategies, rather than on a diversified exposure to a range of asset class risk premiums.
For ‘core’ DGF solutions the simplicity in approach uses a breadth of asset classes and strategies to provide genuine diversification. The diversification is attained in many ways, but an emphasis on exotic credit (for examples the use of emerging market bonds and high yield) and alternatives exposure provides a healthy foundation. This lack of reliance on any one asset class, strategy or skillset makes this approach very appealing.
There is a place for both types of DGF, and the aforementioned types of fund can sit well alongside each other – but really understanding what you want is absolutely key.
Aberdeen’s DGF – True Diversification
The Aberdeen Diversified Growth Fund is a high quality governance solution that provides access to a genuinely diversified portfolio of high quality traditional and alternative asset classes many of which would not be accessible to many Defined Benefit plans. The team that manages the fund is highly experienced and diverse, drawing on a wealth of internal expertise across a broad range of asset classes
For further information please visit the Aberdeen Asset Management website
For professional investors only – Not for use by retail investors or advisers. The value of investments and the income from them can go down as well as up and investors may get back less than the amount invested. A full list of risks applicable to this Fund can be found in the Prospectus and Key Investor Information Document (KIID), which is available from aberdeen-asset.co.uk.