The current investing environment seems more unpredictable than at any time in recent memory. Yet market dislocations arising from these uncertainties represent a major opportunity for multi-asset managers with global reach and the ability to opportunistically select markets and underlying strategies.
For well over a decade, the PineBridge Multi-Asset team has navigated through ever-changing conditions, seeking to outperform irrespective of the economic, political, or market backdrop. Our process seeks to embrace the right markets at the right time, with a focus on attractive underlying strategies and managers and incorporation of environmental, social, and governance (ESG) considerations at each stage.
How do we do it? With an innovative investment culture built around diverse points of view, collaboration with colleagues, and partnerships with clients. This keeps us connected to the challenges facing investors across and within markets.
One of the greatest strengths of PineBridge’s Multi-Asset team is its diversity. With approximately 200 specialists on the ground in five locations around the world, our team brings a range of fundamental expertise, languages spoken, and even scientific backgrounds to the table. Our expansive network provides an edge over larger but less cohesive competitors. As Global Head of Multi-Asset Michael Kelly puts it, “We function both as a team of 20 and a team of 200.”1
We believe our midsize footprint and collaborative culture drive better outcomes for our clients. Compared with multi-asset firms that may be huge, yet siloed, we’re able to identify opportunities that purely top-down managers might miss – and we can also compare the best-of-the-best ideas across asset classes with potentially greater objectivity than pure specialists, who may have biases toward their own asset classes.
1 As of 31 March 2021. Investment professionals include portfolio managers, research analysts, traders, portfolio strategists and product specialists, and are subject to change. Includes investment professionals at the senior vice president and managing director level.
Our network enables us to synthesize top-down views with bottom-up perspectives through active debate, which can thrive only when people know each other well and bring many different perspectives to the table. Our network and portfolios are global, with experienced specialists in EMEA, Latin America, the US, and a particularly strong base across Asia – where the world’s most significant changes are occurring.
“We have many feet on the street throughout Asia,” says Kelly. “Our numerous China watchers helped us build conviction to make a significant investment in mainland China during a challenging time for markets at the end of 2018.”
Our clients often visit on-site to gain deeper insights from professionals across the firm, helping them navigate areas where they’re seeking additional perspectives.
At PineBridge we believe having different opinions represented at the table is crucial to gauging change, and this philosophy is integral to how we work. Our unique culture does not espouse a “house view.” Instead, we encourage people to express their own views on how they see the world evolving through regularly scheduled meetings within and across investment teams.
Big market moves – and opportunities – are born out of uncertainty, and sharing the information and diverse views arising from our global footprint brings clarity through the noise. “Given the breadth of skill sets and geographic perspectives at PineBridge, the right answer is almost always in the room, on the phone, or on the screen. We just need to get it out in the conversation, have a process that compares all the potentialities to ferret out the truth, and then know it when we hear it,” says Kelly.
Chief Economist Markus Schomer draws on a solid basis of research and fundamental and macroeconomic analysis to inform his top-down views, leveraging PineBridge’s large network of local experts to develop probable macroeconomic scenarios.
Schomer and the team focus on both the intermediate-term horizon, an outlook over nine to 18 months, as well as a longer-term view looking out up to three years.
Strategy meetings and forums inform the construction of our Capital Market Line, a five-year view of risk and return across the investment spectrum. These quarterly sessions provide an opportunity to tune out market noise and think clearly together, and are supplemented with seven monthly strategy meetings that focus on current developments.
The Multi-Asset forums are open to all of our investment professionals, who can participate and hear the latest from our subject-matter experts on what’s moving markets and asset classes, from currencies to rates and everything in between. Our unique culture enables a continual dialogue, not only through these meetings but through everyday interactions. This “organized familiarity” is a cornerstone of our firm’s culture that sets us apart in the industry.
The regular meetings that inform our Capital Market Line enable the Multi-Asset team to assess the most compelling opinions from across asset classes and distill them to form our forward-looking view of risk and return.
Our Dynamic Approach Adjusts Based on the Unique Opportunities of Each Market Cycle
For illustrative purposes only. We are not soliciting or recommending any action based on this material. Any views represent the opinion of the investment manager and are subject to change.
At other asset managers, the equity team may decide what the equity market return will be, the fixed income team decides its own return, and so forth, with the multi-asset offering merely combining these inputs. But this can result in an overall portfolio with inconsistent, incoherent views. As Portfolio Manager Hani Redha explains, “At PineBridge, our team assesses the most convincing arguments and combines them to form the Capital Market Line, which informs our portfolio construction.”
These investment forums also enable the team to respond dynamically to market volatility by ensuring that all stakeholders are regularly exposed to different perspectives on the data, helping to glean fundamental signals and inflection points from the noise. This can be highly valuable, both in terms of spotting new opportunities and conducting risk management.
“We can only have an edge if we communicate very effectively with our bottom-up specialists,” Redha says. “So when volatility spikes, we can de-risk because of the trajectory we – as generalists and specialists working together – see unfolding for those fundamentals.”
This ability to be nimble, and adjust as market conditions dictate, is critical to helping our clients meet their specific objectives.
As part of this approach, we often identify new thematic ideas for our portfolios, which reflect the changing environment by combining top-down and bottom-up analysis. We employ a high-conviction, dynamic approach, where we size our positions to reflect the strength of our convictions. This is another key differentiator from our peers.
To benefit from the trend in companies spending to improve productivity, our Multi-Asset and Equity teams collaborated to identify stocks with the highest potential revenue exposure to this theme – for example, stocks in cloud computing and cybersecurity – ultimately creating a thematic basket to express this development.
The team’s productivity basket was recognized by Chief Investment Officer magazine, which named PineBridge’s Multi-Asset team as the most innovative multi-asset manager of 2018.2
At the same time, not every thematic idea will make it into the portfolio. As Michael Kelly says, “You need to be selective and surgical. And the only way you can do that is by looking through the noise and identifying the fundamental driver and how it will affect those select markets over time.”
We can be highly flexible, and go deep quickly, through collaboration between the Multi-Asset and specialist teams at PineBridge.
One example is in collateralized loan obligations (CLOs). “The firm has great depth of capability in CLOs,” Kelly says. “Our fixed income team is a prominent issuer of CLOs, and having that expertise at the firm allows us to identify the most potentially valuable portions of the capital structures of other CLOs in the market.”
2 The CIO Industry Innovation Awards are split into two general categories: asset management/servicing and asset owners. The CIO editorial team makes the final decisions as to finalists and eventual winners with input from their awards Advisory Board, as well as surveys and data where applicable. Third-party rankings and recognition from rating services or publications are no guarantee of future investment success. Working with a highly rated advisor does not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation.
This broad perspective is also critical when it comes to applying ESG screening, something the team has been committed to for over a decade and that PineBridge takes seriously as a signatory of the UN Principles for Responsible Investment.
“Environmental, social, and governance issues present risks as well as opportunities,” says Portfolio Manager Paul Mazzacano. “As a team, we incorporate ESG within our investment process rather than relying on an exclusionary approach.”
We believe that a company’s improvement on ESG metrics is at least as important as its ESG status at a given point in time. Academically focused studies are bearing this out, showing better risk-adjusted returns for firms that are improving upon their ESG practices, irrespective of their starting points, relative to those that score high but are not improving.3
Evaluating forward-looking improvement on ESG grounds may be best attempted by managers who already possess a forward-looking view of a company’s trajectory, as well as that of the broader industry and region. “ESG principles and policy know-how are also critical for successful engagement when encouraging companies to commit to improvement, but these strengths are easier to acquire,” Kelly notes. “Asset owners are likely best served by an advisor who brings all of these perspectives to the table when engaging on their behalf.”
3 Among the studies discussing these themes is a Harvard working paper titled “Corporate Sustainability: First Evidence on Materiality,” published by Mozaffar Khan, George Serafeim, and Aaron Yoon in 2015.
“We go out of our way to be transparent and understandable to clients,” Kelly says. “We think the industry has a lot of heterogeneity in the way multi-asset strategies are delivered, which clients and consultants sometimes struggle to understand. When we speak to clients, they recognize that our alpha source comes primarily from opportunistically selecting about 10 to 15 high-conviction markets in a portfolio construct, and then secondarily, how we express this with a mix of underlying strategies.”
He adds, “Most multi-asset managers will only utilize a set menu of internal strategies. But we are committed to results for our client portfolios, and allocate flexibly across passive, enhanced, and internal or external active strategies, whichever our manager research reveals should add the most value.”
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Opinions: Any opinions expressed in this document represent the views of the manager, are valid only as of the date indicated, and are subject to change without notice. There can be no guarantee that any of the opinions expressed in this document or any underlying position will be maintained at the time of this presentation or thereafter. We are not soliciting or recommending any action based on this material.
Risk Warning: All investments involve risk, including possible loss of principal. If applicable, the offering document should be read for further details including the risk factors. Our investment management services relate to a variety of investments, each of which can fluctuate in value. The investment risks vary between different types of instruments. For example, for investments involving exposure to a currency other than that in which the portfolio is denominated, changes in the rate of exchange may cause the value of investments, and consequently the value of the portfolio, to go up or down. In the case of a higher volatility portfolio, the loss on realization or cancellation may be very high (including total loss of investment), as the value of such an investment may fall suddenly and substantially. In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved.
Performance Notes: Past performance is not indicative of future results. There can be no assurance that any investment objective will be met. PineBridge Investments often uses benchmarks for the purpose of comparison of results. Benchmarks are used for illustrative purposes only, and any such references should not be understood to mean there would necessarily be a correlation between investment returns of any investment and any benchmark. Any referenced benchmark does not reflect fees and expenses associated with the active management of an investment. PineBridge Investments may, from time to time, show the efficacy of its strategies or communicate general industry views via modeling. Such methods are intended to show only an expected range of possible investment outcomes, and should not be viewed as a guide to future performance. There is no assurance that any returns can be achieved, that the strategy will be successful or profitable for any investor, or that any industry views will come to pass. Actual investors may experience different results.
Information is unaudited unless otherwise indicated, and any information from third-party sources is believed to be reliable, but PineBridge Investments cannot guarantee its accuracy or completeness.
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Disclosures by location:
Australia: PineBridge Investments LLC is exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 (Cth) in respect of the financial services it provides to wholesale clients, and is not licensed to provide financial services to individual investors or retail clients. Nothing herein constitutes an offer or solicitation to anyone in or outside Australia where such offer or solicitation is not authorised or to whom it is unlawful. This information is not directed to any person to whom its publication or availability is restricted.
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Colombia: This document does not have the purpose or the effect of initiating, directly or indirectly, the purchase of a product or the rendering of a service by PineBridge Investments ("investment adviser") to Colombian residents. The investment adviser’s products and/or services may not be promoted or marketed in Colombia or to Colombian residents unless such promotion and marketing is made in compliance with decree 2555 of 2010 and other applicable rules and regulations related to the promotion of foreign financial and/or securities related products or services in Colombia. The investment adviser has not received authorisation of licensing from The Financial Superintendency of Colombia or any other governmental authority in Colombia to market or sell its financial products or services in Colombia. By receiving this document, each recipient resident in Colombia acknowledges and agrees that such recipient has contacted the investment adviser at its own initiative and not as a result of any promotion or publicity by the investment adviser or any of its representatives. Colombian residents acknowledge and represent that (1) the receipt of this presentation does not constitute a solicitation from the investment adviser for its financial products and/or services, and (2) they are not receiving from the investment adviser any direct or indirect promotion or marketing of financial products and/or services. Marketing and offering of products and/or services of a foreign financial [or securities related] entity represented in Colombia.
Promoción y oferta de los negocios y servicios de la entidad del mercado de valores del exterior [o financiera, según sea el caso] representada en Colombia.
Dubai: PineBridge Investments Europe Limited is regulated by the Dubai Financial Services Authority as a Representative Office and is making this document available to you. This document is intended for sophisticated/professional investors only and no other Person should act upon it.
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Ireland: When this document is issued in the EEA, unless stated otherwise, it is approved and issued by PineBridge Investments Ireland Limited, licensed and regulated by the Central Bank of Ireland.
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Kuwait: The offering of any security in any vehicle has not been approved or licensed by the Kuwait Capital Markets Authority or any other relevant licensing authorities in the State of Kuwait, and accordingly does not constitute a public offer in the State of Kuwait in accordance with Law no. 7 for 2010 regarding the Establishment of the Capital Markets Authority and the Regulating Securities Activities (“CMA Law”). This document is strictly private and confidential and is being issued to a limited number of professional investors: A) who meet the criteria of a Professional Client by Nature as defined in Article 2-6 of Module 8 of the Executive Regulations No. 72 of 2015 of the CMA Law; B) upon their request and confirmation that they understand that the securities have not been approved or licensed by or registered with the Kuwait Capital Markets Authority or any other relevant licensing authorities or governmental agencies in the State of Kuwait; and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purposes whatsoever.
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Netherlands: PineBridge Investment Ireland Limited, Netherlands Branch is licensed and regulated by The Dutch Authority for the Financial Markets (AFM). This is a branch office of PineBridge Investments Ireland Limited, licensed and regulated by the Central Bank of Ireland.
Peru: Specifically, the Interests will not be subject to a public offering in Peru. The Interests described herein have not been and will not be approved by or registered with the Peruvian Superintendency of Capital Markets (Superintendencia del Mercado de Valores, or the “SMV”) or the Lima Stock Exchange (Bolsa de Valores de Lima). Accordingly, the Interests may not be offered or sold in Peru except, among others, if such offering is considered a private offer under the securities laws and regulations of Peru. The Interests cannot be offered or sold in Peru or in any other jurisdiction except in compliance with the securities laws thereof. In making an investment decision, institutional investors (as defined by Peruvian law) must rely on their own examination of the terms of the offering of the Interests to determine their ability to invest in the Interests. All content in this document is for information or general use only. The information contained in this document is referential and may not be construed as an offer, invitation or recommendation, nor should be taken as a basis to take (or stop taking) any decision. This document has been prepared on the basis of public information that is subject to change. This information may not be construed as services provided by PineBridge Investments within Peru without having the corresponding banking or similar license according to the applicable regulation.
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Sweden: PineBridge Investments Ireland Limited Sweden filial is licensed and regulated by Finansinspektionen. This is a branch office of PineBridge Investments Ireland Limited, licensed and regulated by the Central Bank of Ireland.
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Taiwan: PineBridge Investments Management Taiwan Ltd. Is licensed and regulated by Securities and Futures Bureau of Taiwan (SFB). In Taiwan, this material may not be suitable to investors and is not reviewed or endorsed by the SFB.
United Kingdom: This material is issued by PineBridge Investments Europe Limited, licensed and regulated by the Financial Conduct Authority. In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by PineBridge Investments Europe Limited. Should you like to request a different classification, please contact your PineBridge representative.
In the UK, this material may also be issued by PineBridge Benson Elliot LLP, registered in England (company number OC317119) with its registered address at 50 Hans Crescent, London, SW1X 0NA. PineBridge Benson Elliot LLP is authorised and regulated by the Financial Conduct Authority.
Uruguay: The sale of the securities qualifies as a private placement pursuant to section 2 of Uruguayan law 18.627. The issuer represents and agrees that it has not offered or sold, and will not offer or sell, any securities to the public in Uruguay, except in circumstances which do not constitute a public offering or distribution under Uruguayan laws and regulations. The securities are not and will not be registered with the Central Bank of Uruguay to be publicly offered in Uruguay. The securities correspond to investment funds that are not investment funds regulated by Uruguayan law 16,774 dated 27 September 1996, as amended.
Last updated 3 June 2021