The Multi-Asset Solutions team, specialises in developing comprehensive multi-asset investment solutions. The team consists of over 150 professionals and currently has over $189bn in assets under supervision1.
How does Multi-Asset Solutions approach investing?
We take a flexible approach to uncovering income and growth opportunities whilst maintaining robust diversification. Beyond traditional diversification across asset classes, we built our own proprietary asset allocation framework that allocates risk across sources of return in markets. This framework allows us to analyse the underlying risk and behaviours of asset classes to assess importantly both overlapping and distinct risks. Alongside this framework we also have a dynamic component to our asset allocation process, which allows us to remain nimble and manage portfolios in line with the current market environment, using the insights of a 26 person macro-economic and tactical asset allocation team.
How did your strategies navigate the volatile market environment of 2020?
2020 produced the fastest 30% fall and recovery of global equities on record, representing a true test for investor risk management and decision making.
During the worst of the turmoil, the macro-economic hedging strategy we employ benefited from central banks cutting interest rates. Thereafter as markets recovered, our dynamic approach allowed us to capitalise on the significant spread widening seen in both Investment Grade and High Yield markets which benefitted from a raft of central bank support. The benefits of this were best evidenced in the Goldman Sachs Global Multi-Asset Conservative Portfolio of the three Global Multi-Asset Portfolios managed by the team, which focuses on mitigating downside risk whilst growing capital. The Portfolio produced a total return of 8.9% in 2020 beating 96% of its peers.2
What are your main areas of focus where you believe an asset manager can add value going forward?
- Stay active and adaptive: With valuation at elevated levels, disciplined active management is likely to be critical in identifying securities with attractive total return and income characteristics whilst adapting to changing market conditions. We believe this is of particular importance in today's environment, where dispersions across sectors and asset classes provide ample opportunity.
- Focus on ESG: At Goldman Sachs Asset Management we have 40 professionals dedicated to ESG who work alongside Portfolio Managers to integrate ESG into all aspects of the selection of companies across our actively managed strategies and developing innovative ESG solutions to meet client needs. As a large, active, asset manager, we seek to use our voice through corporate engagement to drive change. We do this by combining Goldman Sachs Asset Management's Global Stewardship effort on top-down strategic priorities which we express in our voting decisions, with bottom-up engagement as part of ongoing meetings with management of companies. We believe diverse teams have the potential to outperform and we expect our portfolio companies to demonstrate diversity at the board-level.
- Capture income opportunities: Income investors had to endure a challenging last year. Beyond dividend cuts of approximately 20%3 across global equities and corporate bond defaults of 7% in the High Yield market4 as a result of the pandemic, some high income-producing assets have markedly underperformed broad markets. Thoughtful portfolio construction which limited the typical sector, regional and credit quality biases that can occur when seeking income was critical. Faced with low interest rates, which seem unlikely to change any time soon, investors looking for income and growth in 2021 and beyond will likely need to (i) take advantage of return dispersion potential within asset classes; (ii) position thoughtfully for the acceleration of the cyclical recovery, which may favour more cyclical equities (iii) leverage a broad toolkit of income producing assets to achieve their investment objectives.
- Source: Goldman Sachs Asset Management, March 31, 2021.
- Source: GSAM / Morningstar as of December 31, 2020 based on the GS Global Multi-Asset Conservative Portfolio (R shares) relative to the Morningstar peer category.
- As of December 31, 2020. Source: MSCI. Refers to the dividend cuts of the 1200 largest companies by market capitalisation as tracked by MSCI.
- As of November 30, 2020. Source: GS Global Investment Research, Moody’s. Refers to the trailing 12-month par-weighted default rate in the US-Dollar denominated high yield market.
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