A turnkey investment solution

Active management of exposures provides the necessary flexibility to adjust investment choices to different market contexts.

Traditional strategies for managing a balanced and diversified portfolio often exhibit a negatively skewed distribution of returns. Indeed, the notion is that broad public markets repeatedly produce modest returns, occasionally punctuated by significant losses. This performance volatility has occurred on various notable events, including the 1994 bond market crisis, also known as the Great Bond Debacle, the September 11 terrorist attacks on 2001, the real estate bubble collapse followed by the financial crisis, and finally when the years of quantitative easing came to an end.

Explicitly incorporating skewness into expected returns analysis is a technical approach considered more suitable for anticipating a portfolio’s expected performance. This approach is not limited to expected returns: it also takes into account extreme values, i.e., exceptional gains or losses that may occur. Thus, the assessment is not based solely on the expected average return, but integrates the entire distribution of potential outcomes, providing a more comprehensive view of risk and performance potential.

This consideration of extremes is essential for investors, as they are rarely in a position to hold their investments long enough for the expected average performance to materialise naturally. Consequently, the ability to anticipate and integrate extreme scenarios into portfolio management becomes a key driver for effective asset allocation. Asymmetriqa’s asset allocation approach aims to maximise the positive skewness of portfolio returns.