The Simple Diet: Managing multi-asset portfolios in uncertainty

Illiquid assets create issues

Many of us embrace a diet to improve health, target personal fitness goals or enhance self-esteem. Yet anyone who has ever tried this knows that keeping it simple is crucial.

A similar concept can be applied to multi-asset portfolios when confronting an economic downturn. Much like removing complexity from our diet and eating simple, healthy ingredients, in these times we have to remove complicated assets and focus on a smaller number of manageable elements. Calories and portion sizes become more controllable, mirroring the ability of portfolio managers to stay within their risk parameters. Simplifying exposures can prudently position portfolios, mitigating outsized risks and idiosyncratic factors. Higher for longer: A 'helpful development' for multi...