Issue link: https://envestnet.uberflip.com/i/1528445
1 FOR INVESTMENT PROFESSIONAL USE ONLY Brooks Friederich Back to Target Being diversified across global asset classes (equities, fixed income, real assets, etc.) has historically provided buoyancy during market volatility. However, over the past few weeks, a traditional "balanced" global diversified portfolio has experienced a drawdown near 20%. A majority of this drawdown was driven by the quick sell-off in global equities over the past few weeks. As a result, model portfolio allocations have drifted to underweight equities relative to their equity/fixed income targets. Most would think this is an opportune time to rebalance. Through our conversations with many multi-asset strategist managers, the feedback on rebalancing has sparked some interesting conversations as to when to rebalance. The short answer is that there is not a perfect answer—or a perfect time. For those strategist managers that are more strategic in their asset allocation and long-term investment views, a common theme here has been to "buy-and-hold," holding-off on rebalancing (for the time being). Others are waiting for markets to normalize a bit more before implementing their rebalance. And, as expected, the more active strategist managers are dynamically managing their asset allocation models throughout the volatility. There are no hard-and-fast rules on rebalancing. I was quickly reminded during a manager call that the purpose of rebalancing is really to maintain a portfolio's risk and return, not to maximize returns. What we know is every manager has a different view and approach. We continue to focus our due diligence conversations on the strategist manager's investment philosophy and process (rebalancing is just one element). We are keenly watching for managers that are straying from their approach in attempts of taking advantage of short-term opportunities. What We Are Hearing And Seeing Envestnet | PMC (PMC) performs the research and due diligence that drives the selection of asset managers on the Envestnet platform. This gives PMC tremendous visibility and insight into the broadest possible range of asset managers and investment types. Our daily commutes to the office, Starbucks coffee runs, and adhoc team discussions have changed to a remote work environment. However, the roles and responsibilities of Envestnet | PMC's research team hasn't. PMC's analyst team, consisting of 28 members, is divided among four teams: Equity, Fixed Income, Liquid Alternatives, and Multi-Asset. Here is what the team is hearing and seeing in their discussions with some of the world's top asset managers.