What drives investment success? In our view, it’s not how much return you get but how effective your return path is. Our market strategist presents portfolio-building pillars that may lead to a better up/down capture ratio—a powerful barometer of success.
Targeting Better Portfolio Up/Down Capture
Build A Better Return Path
Erin Bigley-Senior Portfolio Manager
Build a Better Path is based on the notion that over the coming years we need to focus more on the sequence of levels than the level of returns. The best way to capture that? Try to get more of the market upside than its downside, or great up/down capture ratios. However, there’s a really important behavioral element – we have to determine whether a client is more of an up-participator and really needs to keep up with up-markets or a principal-protector.
Take a look at two ratios which, over time, have demonstrably outperformed the S&P with lower volatility. But if we zoom in on a strong market run, it’s pretty clear to see where the 20/50 portfolio will be challenged in retaining investors. So clearly, understanding investors’ stick-to-it-iveness is important to having success with this approach.
There are three elements to focus on: Better Beta, Efficient Structure and Targeted Alpha.
There are risks in the world that naturally carry better up/down capture ratios than others. Like global currency hedged bonds vs. domestic.
Efficient structure is combining those types of risks to get a great up/down capture experience. For example, a credit barbell – treasuries and high yield generates better up/down capture than treasuries or high yield or comparably rated corporate bonds.
Pick your spots and find areas of the world where there’s a greater opportunity to outperform. Structural alpha, places where indices may be inefficient and there’s a demonstrated informational advantage are key examples of that.
And finally as we go forward, we’re going to be sharing seven key investment themes that can help enhance the up/down capture experience that has been created or magnified by the financial crisis. We’ll have more to share on that in the future, but for now we thank you for joining us and wish you the best up/down capture experience.
• Stay Away from Problem Children
• Avoid the Crowds
• Master Liquidity
• Be the Last Active Manager Standing
• Relook at Re-Emerging Markets
• Embrace Alts 2.0
• Capitalize on Trends Around the World
An investor cannot invest directly in an index. Chart source: Standard & Poor’s (S&P) and AB
The information contained herein reflects the views of AllianceBernstein L.P or its affiliates and sources it believes are reliable as of the date of this publication, May 12, 2017. AllianceBernstein L.P. makes no representation or warranties concerning the accuracy of any data. There is no guarantee that any projection, forecast or opinion in this material will be realized. Past performance does not guarantee future results. The views expressed here may change at any time after the date of this publication. This video segment is for informational purposes only and does not constitute investment advice. AllianceBernstein L.P. does not provide tax, legal or accounting advice. It does not take an investor's personal investment objectives or financial situation into account; investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service sponsored by AB or its affiliates. References to specific securities are presented solely in the context of industry analysis and are not to be considered recommendations by AB. AB and its affiliates may have positions in, and may affect transactions in, the markets, industry sectors, and companies described herein.
The value of an investment can go up or down and past performance is neither indicative of, nor a guarantee of, future results. Investors should consider the investment objectives, risks, charges and expenses of the Fund/Portfolio carefully before investing. For copies of our prospectus or summary prospectus, which contain this and other information, visit us online at www.abglobal.com or contact your AB representative. Please read the prospectus and/or summary prospectus carefully before investing.
Investment Products Offered:
Are Not FDIC Insured | May Lose Value | Are Not Bank Guaranteed
AllianceBernstein Investments, Inc. (ABI) is the distributor of the AB family of mutual funds. ABI is a member of FINRA and is an affiliate of AllianceBernstein L.P., the manager of the funds.
The [A/B] logo is a service mark of AllianceBernstein and AllianceBernstein® is a registered service mark used by permission of the owner, AllianceBernstein L.P.
© 2017 AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 10105