Replace “passive equity investments” with a more specific term. 4. Focus on the key takeaways and implications of the statement.

The S&P 500® total return has been positively correlated with the change in the Federal Reserve’s balance sheet, with the correlation coefficient being around 0.6. This means that as the Fed’s balance sheet has expanded, so too has the S&P 500® total return, and vice versa. What is the significance of this correlation?

This growth has been accompanied by a surge in inflation, driven by supply chain disruptions and increased demand. The Eurozone, on the other hand, faces a different set of challenges. Its economic growth has been hampered by high energy prices, supply chain disruptions, and the ongoing war in Ukraine.

* **Shifting Investment Landscape:** The end of quantitative easing (QE) has led to a significant shift in the investment landscape. * **New Regime:** The current economic environment is characterized by high cash rates, making traditional investment strategies less effective. * **Equity Market Beta:** The “long any risky asset” strategy, which thrived during the QE era, is no longer a viable option.

Bonds’ Role as a Diversifier May Be Less Reliable Intra-day correlation S&P 500® vs. 10-year US Treasury note from 2014-2024 Source: S&P, Newton, June 30, 2024. Against this differentiated background of high cash rates and lower premiums, an investment approach founded on ever-rising markets and lower interest rates may no longer reliably deliver the returns clients are seeking. Investors are increasingly looking for returns that do not rely on trending markets, which reaffirms the case for an active, discerning approach to equity, bond and alternatives investing. Moreover, portfolios will need to be reimagined to allocate capital more efficiently, embrace flexibility, and better embed diversification through broader risk management.

Many asset owners have recently been adopting what has been termed a ‘total portfolio approach’, with investment goals that focus less on measuring the performance of individual components versus index-based benchmarks and more on seeking solutions that can contribute to a total portfolio outcome. Often asset owners will have a risk budget and will seek to determine which ‘best ideas’ to allocate it to. A Liquid Alternative In this context, we believe that liquid diversifiers could provide investors with a significant opportunity. Liquid and flexible alternative strategies offer the potential for uncorrelated returns and downside risk management, without the high fees and additional risks associated with alternative vehicles.

This approach, we believe, would be particularly effective in navigating the current environment characterized by heightened geopolitical tensions and the potential for a recession. Let’s delve deeper into each of these strategies and their potential in the current market environment. **Global Macroeconomic Factors:**

Global macroeconomic factors play a crucial role in shaping investment decisions.

A. Navigating the Market’s Ups and Downs with Smart Strategies
B.

**Market-Neutral Strategies:** These strategies aim to generate returns regardless of the direction of the overall market. They achieve this by employing a combination of hedging techniques and other risk management tools. **Multi-Strategy Solutions:** These solutions combine multiple investment strategies into a single portfolio, offering diversification benefits and potentially reducing overall portfolio risk. **Liquid Alternatives:** These are a subset of alternative investments that are designed to be highly liquid, meaning they can be easily bought and sold.

This collaboration has led to a more robust and diversified portfolio, resulting in better risk management and improved returns. **Key takeaways:**

* **Collaboration between fundamental and systematic investors:** This collaboration has been instrumental in improving portfolio management practices. * **Integration of Mellon Investments Corporation:** This integration has facilitated the sharing of insights and expertise, leading to a more robust portfolio.

* **Active Management:** Newton actively manages its portfolios, seeking to outperform the benchmark through a combination of stock selection, sector rotation, and tactical asset allocation. * **Multidimensional Research:** Newton’s research goes beyond traditional financial metrics. It incorporates macroeconomic, geopolitical, and social factors to identify investment opportunities. * **Disciplined Approach:** Newton’s strategies are based on a disciplined framework, ensuring consistent risk management and portfolio optimization.

These strategies are designed to enhance investor returns while mitigating risk. **Better Beta:** This strategy aims to outperform the market by capturing a portion of the market’s upside while limiting its downside. It does this by investing in a portfolio of securities that are expected to move in a similar direction to the market but with a lower volatility.

**The shift from traditional asset management to expert partnership:**

The traditional model of asset management, characterized by a focus on investment performance and portfolio management, is evolving into a more collaborative and client-centric approach. This shift is driven by the growing expectations of asset owners, who are seeking more than just financial returns. They are looking for expert advice, strategic guidance, and a deep understanding of their specific needs and goals.

This approach, known as client-centricity, is a fundamental shift in how we approach business. Client-centricity is not just a buzzword; it’s a strategic approach that prioritizes the needs and desires of the client above all else. It’s about understanding their unique circumstances, their aspirations, and their pain points. This involves actively listening to their needs, asking insightful questions, and collaborating with them to develop solutions that truly meet their specific requirements.

Mitesh Shah is the Head of Multi-Asset Solutions at Newton Investment Management. He oversees the multi-asset and fixed-income teams in London and the quantitative multi-asset solutions team in San Francisco. He is responsible for developing and implementing investment strategies for institutional clients.

This publication is intended for general information purposes only. It is not intended to be a substitute for professional advice. The author’s opinions expressed in this document are not to be taken as investment advice or recommendations for any purchase or sale of any specific security or commodity. The information presented is based on outside sources believed to be reliable, but its accuracy is not guaranteed.

The indices referred to herein are used for comparative and informational purposes only and have been selected because they are generally considered to be representative of certain markets. Comparisons to indices as benchmarks have limitations because indices have volatility and other material characteristics that may differ from the portfolio, investment or hedge to which they are compared. The providers of the indices referred to herein are not affiliated with NIMNA, do not endorse, sponsor, sell or promote the investment strategies or products mentioned herein and they make no representation regarding the advisability of investing in the products and strategies described herein.

Some information contained herein has been obtained from third-party sources that are believed to be reliable, but the information has not been independently verified by Newton. Newton makes no representations as to the accuracy or the completeness of such information and has no obligation to revise or update any statement herein for any reason. Charts and graphs herein are provided as illustrations only and are not meant to be guarantees of any return. The illustrations are based upon certain assumptions that may or may not turn out to be true.