Liontrust Responsible Capitalism Report 2024 - Flipbook - Page 58
Philosophy
The Liontrust Multi-Asset investment process is based on a number of core beliefs. These
beliefs have been accumulated over the long combined careers of the Liontrust Muti-Asset
team and have developed over many years. The Liontrust Multi-Asset team believes that:
Investment markets are inefficient
Sentiment can cause market prices to move away from their
fundamental value over the short term
Over the long term, markets tend to revert towards levels
justified by their fundamentals
Active management of asset allocation can add value through
exploiting mispricing and their subsequent return to normal
We believe that equity markets remain the key driver of long
term real returns
But we acknowledge that the volatility of the equity market is
not suitable for all investors
Within equity markets, factors such as value, growth, quality
and size have inherent tailwinds due to either behavioural or
market structure inefficiencies
Each of these factors in isolation can be volatile but a
combination of these factors should outperform the broader
index over time
We believe that, with time horizon and budget allowing,
active management will, on average, outperform passive
exposures
Exceptions to this are deep, liquid and efficient markets such
as government bonds and indices with low cross sectional
volatility or high concentration
Asset allocation is the means by which we combine
complementary asset classes together to create a risk and
return profile that is appropriate for different investor cohorts
We believe that an appropriate time horizon is essential and
as a result, a long term, disciplined, robust and repeatable
process will give investors the best chance of long-term
outperformance
58 - Responsible Capitalism Report 2022
ASSET ALLOCATION
The Strategic Asset Allocation (SAA) is the primary determinant of
suitability and long-term risk and returns for investors. The Tactical
Asset Allocation (TAA) is used to seek to enhance investors’ riskadjusted returns while ensuring the funds and portfolios’ risk profiles
are being met. Active management of asset allocation can add
value for investors through exploiting mispricing in the market and
the subsequent return to pricing justified by fundamentals.
DRIVERS OF RETURNS
The Multi-Asset team believes investment markets are inefficient to
varying degrees, with the most efficient being government bonds
and indices with low cross-sectional volatility or high concentration.
Sentiment can cause market prices to move away from their
fundamental value over the short term and revert to levels that are
justified by their fundamentals over the long term. Good active
management will, over the long term, outperform passive exposures
as they exploit inefficiencies and mispricing in investment markets.
Equity markets are the key driver of long-term real returns. Within
equity markets, factors such as growth, value, quality and size in
isolation are volatile. But when combined within portfolios, these
factors should outperform the broader index over time.