How to optimise diversification to improve risk-adjusted returns

The prevailing environment of low interest rates in Europe means that investors cannot rely on government bonds alone for their traditional diversification benefits in a portfolio. They cannot discard the concept of portfolio diversification, though. Rather, they must redefine it to make it fit for purpose in a market where correlations change dynamically.

In this new paper, Legal & General Investment Management’s head of diversified strategies Martin Dietz uses cutting-edge visualisation tools to demonstrate both the subtle relationships that exist between asset classes and the sudden ways in which they can shift. To manage such risks, he highlights three practical ways to embed true diversification within portfolios.

Videos and Podcasts


Podcast: Allocate nimbly and diversify with purpose
It’s said that the only thing that goes up in falling markets is correlation. Diversification across uncorrelated assets, differentiated sources of returns, and foreign currency exposure can help provide natural risk hedges and still deliver the performance sought by investors. In this podcast we talk to Chris Teschmacher, Fund Manager and Duncan Weldon, Strategist, from the Legal & General Asset Allocation team, about why investors need to diversify with purpose and the importance nimble asset allocation.


Video: Improving risk-adjusted returns through diversification
Dr. Martin Dietz, Fund Manager, Head of Diversified Strategies joins Jenny Ellice to discuss why investors should consider diversification, what tools and approaches investors should use to build a diverse portfolio and how Legal & General Investment Management builds diversification into their own portfolios.

Capabilities

Multi Asset

Our multi-asset funds provide investors with a diversified exposure to a broad range of markets. By investing in a range of asset classes, countries, sectors and currencies, investors can avoid the potentially adverse consequences of having a concentrated exposure in any one type of asset or driver of returns.

Active Fixed Income

Our active fixed-income capabilities offer investors access to a wide variety of different strategies to cover the full range of client needs. Through these funds, clients can diversify the bond allocation in their portfolios not only geographically and across government and corporate issuers, but by different duration profiles and by currency.

ESG

Our Future World funds are for clients who want to express their conviction on environmental, social and governance (ESG) themes, depending on their different investment styles. The funds extend LGIM’s approach to responsible investing across a broad array of asset classes and strategies. As active owners, we also work to achieve real, positive change to create sustainable value for our clients.

ETFs

Our range of ETFs covers a broad range of traditional asset classes and long-term thematic opportunities. Our core ETFs offer efficient diversified access to major equity markets, with built-in ESG criteria and mechanisms for avoiding the risks around index rebalancing, while our thematic ETFs allow investors to diversify away from regional and sector mandates by harnessing secular growth markets.

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For further information please contact

George Wheeler
Client Manager, Nordics

+44 (0)203 124 3159