When Thomas Romig started managing multi-asset funds around the turn of the century, he had a high allocation to directional bonds, and alternative strategies were nowhere to be seen.
Romig started to change his strategic asset allocation in 2005/06, he recalls.
“We started to increase exposure to short duration credit strategies or even strategies that don’t have duration,” explains Romig.
Romig has also been taking more risk on the credit side, through asset-backed securities and high-yield bond funds.
Romig has been “a little bit early” in adopting absolute return strategies. “We were a little it early as we couldn’t see interest rates going as low as they are now,” he says.
In defensive multi-asset product, we have a very high allocation. 40% of the fund in absolute return. 2016 we had more or less flat performance. Complicated year for markets. was not a surprise.
Despite the poor recent performance of these funds, Romig remains committed. “Absolute return strategies such as merger arbitrage and equity long/short have different risk drivers.”
“And you shouldn’t forget we have some investments in volatility strategies which should give us protection in drawdowns.”