Active management and the Governed Range

With our Governed Range, you and your clients can benefit from underlying actively managed strategies and tactical updates to the asset mix, as well as the knowledge and experience of Royal London Asset Management.

The Multi Asset team at Royal London Asset Management actively manages all of the portfolios within our Governed Range.

A key part of this is the tactical asset allocation process, which allows the team to make regular changes to the portfolios' asset allocations to take advantage of short-term market movements. This process is supported by additional oversight from our independently-led Investment Advisory Committee (IAC).

See details of the latest tactical asset allocation changes.


The importance of active management

Trevor Greetham, who heads up the Multi Asset team at Royal London Asset Management, explains why active management is so important in multi asset investing.

People always invest in multi-asset funds with an outcome in mind. People have a savings objective, for example, they may be saving for their pension, in which case they're looking to grow their investments over the long run and beat inflation if they can.

It's very important also to design portfolio that is suitable for different individual attitudes to risk. For example, younger investors can generally take greater investment risk and seek greater returns, because a lot of their future pension pot, for example, will be based on contributions to the pension they haven't even invested yet. So they can take some bigger risks with their current pension pot, whereas older investors tend to be a bit more risk averse. So, we build different portfolios to suit different levels of risk.

We think it's very important to be an active investor and we would actually argue there's no such thing as a passive multi-asset fund. The choice of asset classes to include in the first place is an active choice. You should be adjusting the asset mix, as the investing environment changes, both in terms of the valuation, which gives you a view of longer term returns, but also shorter term developments, and, for example, the business cycle.

A systematic framework for tactical decision-making

Royal London Asset Management uses asset class rotation through the economic cycle as the basis for tactical decision-making.

Asset class rotation and the economic cycle. This image is an infographic and has alternative text available if you are using a screen reader.

Graph which shows the business cycle and growth (teal) and inflation (purple dashed line).

The thick teal line in the business cycle shown below shows growth – a boom/bust cycle which on average lasts five years. The purple dashed line is inflation. Inflation rises for a while after growth surges, then takes a while before it drops again.

The thick teal line in the cycle above shows growth - a boom/bust cycle - which, on average, lasts five years. The purple dashed line is inflation. Inflation rises for a while after growth surges, then takes a while before it drops again.

Since growth and inflation are two different cycles, this creates four different stages of the economic cycle.

Investments perform differently at different points in the cycle, which gives opportunities for tactical decision-making. For example:

  • Bonds tend to do well in the reflation phase where both growth and inflation are falling.
  • Equities tend to do best in the recovery phase where growth is strong and inflation is still falling.
  • Commodities tend to do best in the overheat phases where there's strong growth and rising inflation.
  • Cash tends to perform best in the stagflation phase where growth starts falling again but inflation remains high.


The Investment Clock

The Investment Clock is a model used by the Multi Asset team that relates the global economic cycle to the performance of various investments.

It's a central part of the tactical asset allocation process as it helps the team easily identify which stage of the economic cycle we're in and where the economy is heading. So you and your clients can have confidence that the team is taking steps to invest their money in the right asset classes, at the right time.

Find out more about the Investment Clock.