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Fortis Investments implements Smart Benchmark III for balanced funds


The benchmark of Fortis Investments’ balanced funds has changed from Smart Benchmark II to Smart Benchmark III, an updated asset allocation that takes into account new valuation opportu

The benchmark of Fortis Investments’ balanced funds has changed from Smart Benchmark II to Smart Benchmark III, an updated asset allocation that takes into account new valuation opportunities resulting from the recent turbulence in the markets.

Emiel van den Heiligenberg (pictured), head of asset allocation at Fortis Investments, says: ‘It is generally accepted that a portfolio’s asset allocation is the most important driver of the level and variability of its long-term returns. Determining their strategic asset allocation is therefore the biggest decision that investors have to make. Our Smart Benchmark III model portfolios are well diversified and are positioned to benefit from the expected market recovery in the coming years.’

Prior to October 2002, Fortis Investments used a traditional mix of government bonds and equities with a domestic currency bias as the benchmark for its balanced funds.

In November 2002, it put in place its first Smart Benchmark in order to improve the risk-return characteristics of its balanced funds. This was an updated benchmark that included new asset classes such as European small cap equities, European real estate securities, investment-grade corporate bonds and convertible bonds.

Given the growing importance of asset classes such as commodities, local emerging debt, Asian real estate and absolute return vehicles, Fortis Investments believed it essential to seek new sources of diversification in order to maintain and enhance the risk-adjusted returns of its Smart Benchmark. It therefore introduced Smart Benchmark II in October 2005.

The recent market meltdown has had a profound effect on asset class valuations and their future prospects. As a result of the crisis, the valuations of many asset classes now look particularly attractive over a medium-term horizon, although some are likely to recover more quickly than others. Smart Benchmark III is an updated allocation that reflects these new opportunities.

As part of the review process Fortis Investments has also updated the model it uses to incorporate new industry and academic insights into portfolio construction in order to produce the best-possible risk-return profiles.

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