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A new way to diversify our client portfolios and funds

We’ve introduced a ‘liquid alternatives’ fund to our investments to add increased diversification and help manage any market volatility in the coming months. Here’s why, and how it works.

A fund designed to add diversification and potentially reduce volatility during challenging market conditions is now part of our more defensive investment products.

The fund, exclusive to Coutts, accesses over 15 ‘liquid alternative’ investment strategies to help diversify our holdings beyond traditional bonds.

It focuses on areas with low sensitivity to traditional stock and bond markets, and aims to generate stable returns regardless of whether those markets rise or fall.

Liquid alternative strategies adopt a range of techniques and financial instruments, such as short-selling for example – a strategy that aims to benefit when an asset's price drops.

We’ve set up the fund – called the Coutts Diversifying Alternatives Multi-Manager Fund – as part of a strategic relationship with J.P. Morgan Asset Management. This gives us access to fund managers at a business with 30 years’ experience of this type of investing.

The fund has been added to our Defensive, Cautious and Balanced portfolios and funds.

The value of investments, and the income from them, can go down as well as up, and you may not receive the amount of your original investment. You should continue to hold cash for your short-term needs.

A more stable type of return

Fahad Kamal, Chief Investment Officer, Coutts, explains: “One of the key pillars of our investment approach is diversification – working to pre-emptively manage volatility within acceptable limits. This fund is an important, innovative tool to help us achieve that.”

He adds, “This is about trying to generate a different, more stable type of return for our clients, helping cushion their investments from the worst of any volatility.

“While we continue to hold bonds to help diversify our investments, this fund lets us take that diversification to the next level.”

“This is about trying to generate a different, more stable type of return for our clients, helping cushion their investments from the worst of any volatility.”

Fahad Kamal, Chief Investment Officer, Coutts

Why we’ve introduced the fund

In recent times, stocks and bonds have been more highly correlated to each other than they have been historically. Also, bonds in their own right are exhibiting higher volatility than markets were accustomed to over the four-decade bond bull market that ran until 2022.

“Traditionally, investors have been able to use stocks and bonds to off-set one another,” explains Fahad. “Either markets are strong and stocks do well, or times are tougher, central banks cut interest rates, and bonds do well.

“But today we have challenges around high inflation as well as geopolitical issues – challenges that could potentially cause both bonds and stocks to fall at the same time.

“Although that’s not something we currently expect, we need to be prepared for the possibility. We need a new buffer, and that's where this fund comes in – something that aims to operate outside the traditional tide of stocks and bonds.”

Claude Kurzo, UK Country Head at J.P. Morgan Asset Management, says: “We’re delighted to be launching a truly innovative liquid alternatives solution as part of our strategic relationship with Coutts – a solution which has been tailored to meet the specific needs of Coutts’ multi-asset portfolios and seeks to offer diversification and better client outcomes.”

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