We are currently in the eleventh year of a bull market that has been primped and poked with previously unimagined amounts of monetary stimulus. Now, global economic growth is slowing. Uncertainty is rising, given the length of the bull run and the unprecedented amount of central bank intervention. That leaves investors in a difficult position.
One could easily argue for turning up the defence of your portfolios. However, cycles often last longer than many believe. With central banks becoming more accommodative and some positive signs on economic growth, the cycle could just as easily keep going. For how long? Years perhaps. Nobody really knows.
Navigating market uncertainty can feel like a full-time job. Getting more defensive often involves reallocating portfolios towards defensive assets, such as dividend stocks, government bonds and precious metals. But, acting too soon can leave you underexposed to the continued rally, leaving returns on the table.
Purpose Tactical Asset Allocation Fund (RTA) can help by providing a tactical sleeve for your portfolio. It is designed to tilt more towards equities when times are good and tilt towards bonds when markets weaken.
It’s a rules-based strategy that can range from 100% equity to 100% fixed income, moving between risk-on and risk-off positioning to adjust to the market. It’s not a traditional alternative fund, but it provides the same sort of volatility management that can greatly improve risk-adjusted returns.
1. Reducing the human emotion from the process
The fund is rules-based, systematizing the process of allocation. This removes emotion from the decision-making process as changes are not based on what someone thinks is going to happen in the markets. The strength comes from the fund’s ability, using broad based equity & bond ETFs, to change its allocation quickly if the market is changing direction. With RTA, you can help avoid the emotional mistakes that all of us are prone to make.
2. Adding a dynamic component to your asset allocation
Asset allocation is the primary driver of portfolio performance and volatility. And while a portfolio’s long-term asset allocation should be based on an asset mix that puts an investor in the best position to reach their long-term goals, we believe value can be added by tactically tilting the asset mix at times. RTA provides this tactical allocation, and since it can move from 100% equity to 100% bonds, even a small allocation can help tilt the overall portfolio and make a meaningful difference in outcomes.
3. Save time and energy
Because the fund automates the process, investors can, quite literally, set it and forget it. By holding RTA, you can avoid the time, effort and cost of trying to be tactical yourself.
The Bottom Line
The traditional way to navigate uncertainty is with asset allocation, but it’s often easier said than done. The decisions required can be tough and increase stress levels. Recognizing our own human biases makes the process even harder. Purpose Tactical Asset Allocation Fund is a simple way to outsource the tactical process and ensure your portfolio has the flexibility to adjust to any market environment.
– Craig Basinger is the CIO of RichardsonGMP and the portfolio manager of Purpose Tactical Asset Allocation Fund
All data sourced from Bloomberg unless otherwise noted.
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Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” intend,” “plan,” “believe,” “estimate” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
