Multi-Asset Strategy:
Global Multi-Asset Diversified Income
A strategy aims for income returns, capital growth and managed volatility
How to capture income and manage volatility in this lower for longer state? Learn more Learn more
How to create stable income and drive performance via multi-asset strategy investment? Learn more Learn more
What differentiated features specific to the investment strategy can support your conviction? Learn more Learn more
How to capture income and manage volatility in this lower for longer state?
In order to capture income during this time, income-oriented asset classes like higher yielding/income-generating securities should remain well bid.
Growing portion of global fixed income market is negative-yielding (trillion US dollar)1
When volatility rises through natural market cycles, our testing indicates an option strategy2 can aid volatility and drawdown management (see below table).
Further evidence during the 2008-2009 global financial crisis also shows standard equity portfolios (represented by the S&P 500 index without an option strategy) had a higher drawdown than portfolios with an option strategy (represented by CBOE S&P BuyWrite Index and PutWrite Index).
Historically (July 1986 - May 2019), an option strategy can help portfolios reduce volatility throughout all market cycles3
| Indices | Annual volatility | Maximum drawdown |
|---|---|---|
| S&P 500 Index | 14.90% | -50.95% |
| CBOE S&P 500 BuyWrite Index | 10.55% | -35.81% |
| CBOE S&P 500 PutWrite Index | 9.93% | -32.66% |
Over the long run, we believe an option strategy tends to outperform generic equity markets, as the premiums from the options should provide a buffer that partially offsets the drawdown from the equity holdings.
How to create stable income and drive performance via multi-asset strategy investment?
Multi-asset (mix of bonds and equities) allocation approach aims to help investors create relatively stable income as well as offer the advantage of a buffered downside during periods when the market is under pressure.
Traditional and non-traditional asset classes
Fixed income
Investment grade corporate bond
(IG corp bond)
A high quality source of income and a portfolio risk diversifier
High yield corporate bond
(HY corp bond)
Offers the potential of a higher yield with less interest rate sensitivity
Emerging market bond
(EM bond)
Taps into EM growth potential and offers attractive yields
Preferred securities
Hybrid securities that combine fixed income and equity features
Equity and equity related securities
Global equities
Provides dividend income with capital growth potential
Global REITs
Offers stable and transparent yields
Equity option strategies
Captures income growth through option premiums, and helps manage the volatility of equity investments
What differentiated features specific to the investment strategy can support your conviction?
By selling calls and puts on sector and country indices, not on single securities, the investment strategy can capture the equity holdings’ own stock-specific outperformance in the equity sleeve.
Correlation of options and other traditional asset classes4
Relatively low correlation
Moderate correlation
Relatively high correlation
- Bloomberg, as of 13 September 2019.
- There are many option strategies available that aim to limit risk and maximise returns.
- Remark: A maximum drawdown is a peak-to-trough decline for an investment during a specific period before a new peak is attained. Maximum drawdown is an indicator of downside risk over a specified time period. Source: Bloomberg, CBOE, S&P. Data from July 1986 to May 2019. It is not possible to invest directly into an index. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.
- Bloomberg. Correlation coefficient is calculated based on weekly performance from March 2009 to March 2019. Correlation ranges from +1 (perfect positive correlation) to -1 (perfect negative correlation). Relatively low correlation refers to correlation coefficients equal to or smaller than 0.5, moderate correlation between 0.5 and 0.75 (inclusive), and relatively high correlation above 0.75. Representative indices of each asset classes: Global REITs refer to FTSE Nareit Global REIT Index; Preferred securities refer to ICE BofAML US All Cap Securities Index; Equity option strategies refer to 50% CBOE S&P 500 BuyWrite Index and 50% CBOE S&P 500 PutWrite Index; Investment grade corporate bonds refer Bloomberg Barclays Global Investment Grade Corporate Bond Index; High yield corporate bonds refer to Bloomberg Barclays Global High Yield Corporate Index; Emerging Market bonds refer to JPMorgan EMBI Index; Global Equities refer to MSCI AC World Index.
