Artemis Strategic Assets Fund Investor Q&A

What’s changing with the Artemis Strategic Assets Fund? 

A new fund manager, David Hollis, took over as lead manager of the Artemis Strategic Assets Fund on 6 June 2023.  

Why are we making the changes to the way we invest the portfolio?
To deliver a more stable experience for investors in terms of return, effectively we are aiming to lower the volatility or risk in the fund whilst meeting the existing benchmark return. 

For new investors that come onboard, the returns experience should be more commensurate with their risk profile.

The fund was launched in 2009, what is different about the current investment environment from then? 
Risk assets will enjoy less support by central banks than during prior decades. Non-standard monetary policy, where central banks directly purchased assets from investors, have effectively been exhausted.
The Fear of Missing Out (FOMO) of a co-ordinated appreciation in asset prices will be less relevant, and asset prices are likely to be far more volatile going forward without central bank support.

The broad implications are the need for a more dynamic approach to investing, rather than a typical long-term buy-and-hold approach, where the latter is likely to experience more frequent drawdowns than in the past.

Over what time period will the fund aim to achieve its objective of CPI + 3%?
The fund’s objective remains to grow the value of the client’s investment by greater than 3% above the Consumer Price Index (CPI) per annum after fees over a minimum five-year period.

Where could this sit in a client’s portfolio? Is it a core holding?
The portfolio is designed as an all-weather approach to investing, aiming to generate returns in all market As a result this can represent a core holding in any investment portfolio.
Additionally, there are periods when the portfolio may be net short of equities. This allows the portfolio to exhibit much lower correlation to broad equity markets, and hence the holding can act as a diversifier alongside other investments within a portfolio.

Why do you think it is a suitable approach for a multi-asset strategy?
It allows us to filter the best opportunities from a very broad set of assets that covers equities, bonds, FX and commodities in a quantitative manner.
We can then focus our attention on these particular opportunities and ignore those that don’t look attractive.

What types of investment instruments will you be using?
The fund aims to gain exposure to asset indices through the use of exchange-traded funds, futures and options.

What is the range of underlying asset classes you will be looking to get exposure to?
The fund will focus on highly liquid asset classes only.We must be able to sell-down the entire exposure of any particular trade within one day.
Specifically, we will invest in indices covering developed market equity regions, sectors, developed market interest rates, some foreign exchange, and commodities.

How often will you be trading?
The portfolio is reviewed daily and although not necessarily traded daily, this will depend on the risk environment. As we aim to limit significant falls in value for this fund, we will cut positions that are not working, hence the need for a daily review.

What type of derivatives will you be using?
We aim to trade futures and options at the index level of asset classes. This enables us to gain exposure to asset classes more cheaply than through buying cash equivalent instruments.

The fund has always been able to use leverage, how will you use it?
By using derivatives, we can gain sufficient exposure to asset classes in the fund to meet the risk profile of the fund, with very little cash outlay.
The remainder of the cash can then be invested in short-term, low-risk securities that effectively generate a risk-free rate of return in addition to the returns from the active trading strategy through trading asset classes.

Are derivatives and the use of leverage a higher-risk way of running the portfolio than its historical style of largely long-only equities?
The portfolio will manage risk more closely than it has done historically, firstly from a top-down perspective (both realised and forecast) and secondly at the individual trade level, where each trade will have a maximum allocated risk budget.
This two-pronged approach is designed to mitigate significant declines in portfolio value experienced by a long only equity portfolio every 10 years or so.

Moreover, we believe that the end of Quantitative Easing likely heralds a new era where financial market volatility will be higher, and hence equity markets are more likely to experience periods of sharp decline.

What is the manager’s background in running a strategy like this?
David Hollis has around 15 years’ experience in managing multi-asset strategies, and previously managed a suite of risk-targeted funds at another mid-tier asset manager, successfully delivering investors returns commensurate with their risk profile.  His more recent experience, also using a systematic approach, resulted in a Lipper Fund Award for the portfolios.