Liontrust’s multi-asset team adds convertibles for the first time


John Husselbee added convertible bond weightings for the first time as part of the Strategic Annual Asset Allocation (SAA) for Liontrust’s multi-asset portfolios.

As part of the group’s annual SAA, the company’s multi-asset manager said there is now a 10% allocation to convertibles in its low and medium risk SAAs due to the different risk / reward profile offered by these debt instruments.

“Convertibles can be used as a hybrid, offering characteristics of stocks and bonds,” Husselbee said. “They provide regular income and return of capital at the end of a fixed term like traditional bonds, but with an option to convert into a number of shares, allowing holders to participate in the rise in the price of the shares. while maintaining a level of protection similar to that of bonds against falls. “

Husselbee said that Liontrust’s acquisition of Architas UK’s investment business last year expanded its multi-asset investment team and gave it additional resources to analyze a broader set of investment classes. ‘assets.

“Now that convertibles are included in the SAA, we have broadened our research mandate to assess the suitability and availability of funds investing in this part of the market,” he said.

“Middle lane of the highway”

Any move in Liontrust’s SAA is not tactical, but rather represents a shift in the risk / return profiles of asset classes. Elsewhere, the weightings of equities, bonds, cash and alternatives remained broadly the same as in 2020.

“The SAA is our allocation if we have no opinion on the relative attractiveness of the asset classes,” Husselbee said. “It’s the middle lane of the freeway if you will, or the chosen route to get to our ultimate investment destination. Where we can add value and take advantage of cheaper valuations is through Tactical Asset Allocation (TAA) and how we select funds to implement our views. “

Looking at the annual SAA, despite obvious spikes amid the initial fallout from the covid pandemic, Hussselbee said volatility had fallen again and his numbers continued to reflect lower levels of recent years.

“Volatility has been below long-term averages for over a decade, depressed by quantitative easing that began in the aftermath of the global financial crisis and has continued, in one form or another, since,” did he declare.

“More recently, there have been growing concerns about the resumption of inflation and central banks starting to reduce their asset purchases, which could lead to a resumption of volatility,” he added. “While this may mean changes in our SAA when we review the position next year, we still wouldn’t expect anything too substantial given that we are analyzing long-term data.”


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