Russell Investments unveils ‘downside management’ toolkit
Firm equips investors with rich toolkit of resources to brace for and manage through a market downturn
SYDNEY, 19 October 2017 – Russell Investments’ strategists believe a global equity market downturn could be imminent, so to help investors approach potential market volatility, the global asset management firm has aggregated timely content online in a Downside Management Toolkit.
"We believe a significant, short-lived market pullback could occur in the near-term, given current valuations and market complacency," said Erik Ristuben, chief investment strategist at Russell Investments. "We’ve been educating clients on preparing for increased market volatility given that we are in the ninth year of the global bull market, and we’re happy to share our combined insights and research through this new online resource.
"The toolkit features three components with specific purposes: 1. Share the latest capital markets insights from the firm’s global team of investment strategists; 2. Reveal how Russell Investments manages downside risk in their portfolios; 3. Offer related resources to assist financial advisers and end investors with their investment choices.
Pointing to "The Cycle of Emotions" chart in the toolkit, Mr Ristuben said he believes investors today are in the "euphoria" stage of the current cycle, moving toward the "complacency" stage. "Successful investors recognise that this is the point of maximum financial risk," he added.
The Downside Management Toolkit includes a summary of the firm’s capital markets insights, such as the latest quarterly global market outlook, which highlights the increasingly asymmetric valuations in share markets as US equities climb to historical levels.
Other featured content in the Downside Management Toolkit includes:
- Downside protection; What, why, how and when?, which encapsulates the firm’s views on downside protection, which ultimately is about helping investors achieve their required rate of return at a level of risk they can accept and commit to for the long run.
- Markets bounce back after shocks, which reminds investors that previous periods of sharp declines have been followed by periods of favourable returns. For example, Australian equity returns collapsed about 40% during the global financial crisis in 2008 and 2009, but surged 47% the following 12 months. This strong historical tendency of markets to rebound suggests that dramatic alterations to asset allocation that are driven out of fear may not help investors achieve their longer-term objectives.
- Standing at the crossroads: An investor’s choice of response after market turmoil, which shows an example of the dramatic impact of an investor’s choice of response during market turmoil on their future wealth balance, comparing the decision to stay invested in a diversified multi-asset portfolio versus cashing out.
Andrew Sneddon, managing director and senior portfolio manager, multi-asset solutions, in Russell Investments’ Sydney office, said, "We’ve been working to manage downside risk in our portfolios in three ways: diversify sources of returns, use a robust dynamic asset allocation process to guide tactical positioning and seek effective implementation capabilities."
"Our Dynamic Real Return funds for example were developed specifically to maintain clients' investment goals with substantially less volatility and lower draw-down risks," Mr Sneddon added.
Russell Investments’ Downside Management Toolkit will be routinely refreshed with additional content, including insights and research related to the firm’s core capabilities of asset allocation, capital markets insights, factor exposures, manager research and portfolio implementation.
About Russell Investments
Russell Investments, a global asset manager, is one of only a few firms that offers actively managed multi-asset portfolios and services that include advice, investments and implementation. Russell Investments stands with institutional investors, financial advisors and individuals working with their advisors—using the firm’s core capabilities that extend across capital market insights, manager research, asset allocation, portfolio implementation and factor exposures— to help each achieve their desired investment outcomes. The firm has AUD$368.6 billion in assets under management (as of 30/9/2017) and works with more than 2,500 institutional clients, independent distribution partners and individual investors globally.
Headquartered in Seattle, Washington, Russell Investments operates globally with 21 offices, providing investment services in the world’s major financial centers such as London, Paris, Amsterdam, Sydney, Tokyo, Shanghai, Toronto and New York. For more information about how Russell Investments helps to improve financial security for people, visit www.russellinvestments.com/au.
Issued by Russell Investment Management Ltd ABN 53 068 338 974, AFS Licence 247185 (RIM). This document provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation or needs. This information has been compiled from sources considered to be reliable, but is not guaranteed. This document is not intended to be a complete statement or summary. Copyright © 2017 Russell Investments. All rights reserved. This material is proprietary and to be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments.
Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates, with a significant minority stake held by funds managed by Reverence Capital Partners. Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.
First Used: October 2017