Hello. My name is Brian Storey, and I'm the Head of Multi-Asset Strategies at Brinker Capital.
In this short video, I'd like to spend a few minutes highlighting the benefits that diversified multi-asset portfolios can provide to advisors and clients when attempting to navigate challenging market environments.
Most investors appreciate the role that diversified multi-asset portfolios can play in helping them achieve their longer term goals and objectives.
However, oftentimes, investors don't fully appreciate the way that diversified portfolios can help deliver more positive outcomes during periods of heightened market volatility.
Instead, they may think that they should get out of the market and go to cash to ride out the storm or use tactical allocation strategies that will be able to get in and get out of the market for them at just the right times. While this nirvana would be nice, it doesn't usually play out like this in real life.
Although global equity markets have staged a sharp recovery from the challenging times they faced just a couple short months ago, we still think it's a great time to focus on the benefits of diversified multi asset portfolios and providing more consistent returns that can help investors weather difficult markets without making significant all in or all out decisions, which are often rooted in emotion, and that can have a significant negative impact on their ability to successfully achieve their longer term goals.
In this chart, we can see that during the period from April first to April eighth of this year, US large cap stocks declined by over ten percent.
During this same period, diversified multi asset portfolios represented by Morningstar category averages held up much better regardless of whether we're focusing on conservative, moderate, or aggressive portfolios.
Likewise, for the year to date twenty twenty five period through mid May, we see outperformance for diversified multi asset portfolios versus US large cap stocks.
So what are some of the drivers of this outperformance by multi asset portfolios during both time periods?
We can see that while US large cap stocks were suffering in early April, a wide array of diversifying asset classes, such as international stocks, core and noncore fixed income, alternatives, and real assets like infrastructure and commodities held up better than US large cap stocks.
And for the longer year to date period, all of these asset classes have also outpaced US large cap stocks with international stocks and real assets leading the charge.
Finally, as investors consider different ways that they can attempt to offset some of the downside risk of US equities during challenging market environments, some investors gravitate toward tactical strategies as a holy grail to get in and get out of the markets at the right times to avoid the downside while also capturing the upside.
This narrative sounds great, having our cake and eating it too. But in actuality, most tactical strategies have failed to deliver on this objective.
As we can see in this chart, tactical strategies, again, as represented by Morningstar category averages, failed to deliver any improved performance during a sharp sell off in early April and have lagged moderate allocation portfolios by a notable margin over longer term time horizons.
We think this is an important reminder that diversified multi asset portfolios that are appropriately aligned with client risk tolerances can help investors weather difficult market environments while also offering investors a compelling option to help them achieve their longer term goals and objectives. Thank you for watching. If you have any follow-up questions, please reach out to your Orion team.