Investment Innovations

See below some of the ways we have innovated within the investment industry.

2001	Hedge funds	Early on, we were very bearish of equity markets and were advising clients to find ways to diversify this risk. We started by proposing that clients considered using hedge funds which at the time was a lot less conventional than it would be now!
2002	Unconstrained equity mandates	We have long believed that if active managers are to be effective, we should take off the shackles that bind them, for example, by making them not worry too much about a market index. We’ve been recommending this approach ever since.
2003	Broad bond mandates	We were very interested in accessing the high yield market but were concerned about whether it was practical to change the allocation to this class as conditions change. So we built this ability to rotate into the mandate and called it Broad Bonds.
2003	Equity structured solutions and portable alpha	We also developed ways to manage pension risk through building ways of investing linked more directly to bonds (portable alpha) and protecting equity downside (equity structured solutions). These solutions have been superseded by subsequent innovations.
2004	Liability hedging	We started to advise clients that it makes sense to manage their bond-related liability risk through use of derivatives in the form of a liability hedge. Liabilities are bond-related because as bond prices change, so does the actuarial assessment of the liability value.
2005	Diversification and liability hedging strategy	We had been working on how to address the pension investment problem for some time. This analysis, which formed the bedrock of our advice from 2005 onwards, was that diversification coupled with liability hedging was a very compelling strategy and the two brought out the best in each other.
2006	Dynamic asset allocation	We developed the concept of Dynamic Asset Allocation as a means of achieving rotation between asset classes efficiently within an institutional portfolio.
2007	Equity hedging	Early in the year, we advised clients that we believed an equity market fall was coming – see our paper “Shaping equity returns” on the Risk Management Solutions Publications page – and that an effective way of addressing this was to hedge equity risk.
2008	Dynamic mandate allocation	A key innovation for us is the potential for institutional investors to add value through rotating between their various mandates as market conditions change.

We continue to develop further innovations and we are in the process of using more recent ideas to add value for our clients.
Overall, the important message is that innovation forms a key part of our ability to help our clients improve performance. Importantly, these innovations have resulted in improved performance.