The multi-asset manager meets the monkey

FEBRUARY'S spike in market volatility, correction in equity markets and increase in US 10-year bond yields towards 3 per cent was long awaited, and has significant consequences for asset owners and their multi-asset managers. As a retail investor in a lifestyle fund (conservative, balanced or aggressive) or a CPF account, a high net-worth client of a private bank, or an institution evaluating multi-asset managers (such as the Singapore Accountant-General's Department), this is the most crucial period to determine if you have the right multi-asset manager.

The last few years have been really easy for everyone. Even a monkey throwing darts to decide the allocation between equity, credit and treasuries would have delivered healthy returns, as all asset classes went up. But this was luck, not skill. The increased market volatility will now demand allocation skill from the manager, separate the good manager from the bad, the skilled manager from the monkey. Here are a few tools to help distinguish a skilled manager from a monkey.

1. An absolute multi-asset mandate requires a cash benchmark