The active investor
Multi-asset funds are amongst the most popular in the Irish market from a new business perspective, and the Zurich Prisma range has seen inflows of over €1bn in the three and a half years since their inception, writes Ian Slattery.
Risk targeted multi asset funds were born out of the global financial crisis as many funds in the market at this time had more rigid asset class ranges, and were perceived as not being flexible enough in times of stress.
Risk rating for individuals has also grown in popularity in recent years as another metric with which to help inform the investment decision. Discussions around risk are necessary but it is important to acknowledge that it is only one strand to the conversation. between financial brokers and their clients. The holistic advice that can be delivered should be accompanied by award winning active investment management which helps to effectively navigate investment markets, and the negotiation of the trade-off between risk and return.
What do the Prisma funds do?
The success* of the Prisma Multi-Asset Fund** range is built upon the quality of Zurich Investments, our in-house active investment managers; combined with our volatility modelling expertise. The Prisma funds are each derived from our Active Asset Allocation (AAA) fund, which is a multi-asset fund that invests across equities, bonds, property, cash, and a comprehensive range of commodities. This fund is run with a broad investment mandate and no risk constraints apply to its management.
At Zurich we have designed a framework to enable the views of our managers to be projected across our range of multi asset funds across the ESMA range from 2 to 6. This framework allows Prisma asset allocations to be rebalanced to align with any changes in our asset allocation views. These re-allocations are done in real time, delivering agile asset allocation adjustments to the Prisma funds. This allows our manager to be active, flexible, and to align the risk targeted funds to our asset allocation views.
How does it work?
Zurich has developed a proprietary statistical investment model designed to run simulations of asset allocations throughout a diverse range of investment scenarios. Using this model, we are able to derive asset allocations, applying our house view across the spectrum of risk/return appetites that Prisma covers.
These asset ranges are implemented to best meet the requirements of Prisma investors by: allowing sufficient scope to allow our house view be reflected in Prisma asset allocations, and by delivering the required risk/return profile to each set of Prisma investors.
As the Zurich asset allocation committee adjusts the distribution of the assets in the AAA fund, in respect to their asset ranges, each Prisma fund rebalances its own split, in accordance with their designed asset ranges. With both our Investment Managers and Product Development teams based at our head office in Blackrock, Co. Dublin, we have the ability to act quickly and efficiently in implementing our active conviction calls.
This allows us to deliver the our proven multi-asset investment management skill across a range of risk-targeted funds, delivering performance and peace of mind to investors seeking a certain risk/return profile with the best multi-asset manager in Ireland.
It is important to note that risk is not a static calculation or attitude, but has the potential to change and evolve. We believe that this principle should also be evident with how we manage our Prisma Multi-Asset fund range. Risk management should be considered not in isolation, but in conjunction with the potential investment returns present.
Zurich don't claim to be market forecasters and, whilst we are currently positive on the outlook for the world economy, we acknowledge the existence of a number of potential headwinds for investment markets. There is a combination of circumstances present in markets which reinforce the need for active management, and a flexible approach to targeted risk levels.
*Source: Zurich Life, February 2017 - Winner of the IBA Best Investment Performance for three years in a row (2014, 2015, 2016).
**The Prisma Multi-Asset Funds were previously known as the Pathway Multi-Asset funds.