FundQuest, a managed account services provider, has adjusted its recommended allocation to include three additional asset classes on its open architecture platform for financial adviser
FundQuest, a managed account services provider, has adjusted its recommended allocation to include three additional asset classes on its open architecture platform for financial advisers.
The three additional asset classes are hedge-style mutual funds, commodities and global bonds.
The firm says commodities have the potential to provide inflation protection to a portfolio, while hedge-style mutual funds exhibit low correlations to long-only stock and bond indices and, on average, have offered a superior ‘return-per-unit-of-risk’ compared to stocks and bonds. Since hedge-style mutual funds are under Securities and Exchange Commission regulatory oversight, they offer investor protections including transparency and a level of liquidity which most traditional hedge funds do not provide.
Finally, bonds of developed (international) markets currently look attractive on a relative value basis when compared to the US bonds which usually dominate traditional portfolios for US based investors, it says.
In FundQuest’s model-based-portfolios, approximately ten per cent of the assets are allocated to alternative investment classes.
Tim Clift, chief investment officer at FundQuest, says: ‘Our research indicated that the market correction has provided an opportune time to add these three asset classes. In particular, we see good valuations, increased portfolio diversification, and a means to add a hedge against future inflation and a weaker dollar.’