Yet that’s just how some people manage their money. They put their investments on cruise control and then forget about them.
Sun Life Global Investments understood the risks of a cruise control mentality when it launched Sun Life Granite Funds ten years* ago. Over the years, the portfolio managers developed a process to capitalize on changes in the markets. This strategy is known as tactical asset allocation.
Changes in economic indicators affect the market. They include market volatility and the value of stocks. Sun Life Granite Portfolios take these factors into account in its tactical asset mix, along with other factors like rising inflation, changing interest rates, volatility in the price of oil, and currency fluctuations.
How does it work?
For each Sun Life Granite Portfolio, the managers start with a weighting for each class of assets. The weighting includes management style, whether active or passive.
When market conditions change, Portfolio Managers can sometimes seek opportunities in specific asset classes. When that happens, the managers may temporarily diverge from their original asset mix.
By making these adjustments, they can reduce the portfolio’s risk, and take advantage of market opportunities! These tactical shifts are done gradually, however, and within pre-determined guidelines.
How would this look in practical terms? Here’s an example: Portfolio Managers have maintained an overweight position in global equities for some time. This means that the portfolios have larger holdings of this asset class compared to the original strategy. In this specific case, the managers want to capitalize on large- and mid-cap company growth in specific regions of the world.
Currently, Portfolio Managers have a larger cash position in the bond asset class. That’s another example of tactical asset allocation. If bond yields increase, they can use some of the cash to purchase more bonds.
Sun Life Global Investments manages the Sun Life Granite Portfolios on a daily basis by making tactical adjustments to the asset mix. Because when it comes to investing, good returns don’t happen on cruise control.
*The Sun Life Granite Conservative Portfolio is not 10 years old. All the other funds are 10 years, but this particular fund is not 10 years as its inception is April 2, 2012.
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