Low and moderate risk investment opportunities in a low interest rate environment
What we mean by low and moderate risk
By «low-risk», we understand a solution that has a moderate probability of losing a small amount of money, or has a low probability of losing a significant amount of money.
An investment solution with a « moderate risk» has obviously a higher probability of achieving a loss and / or may likely result in a higher loss (versus a low-risk solution).
Diversify your portfolio and reduce its level of risk
If inflation is added to the negative yield of cash in EUR, the real return for an investor today would be -1,6% per annum. In our view, the best way to avoid this paradoxical situation is to wisely diversify risks by diversifying asset classes, currencies, underlying assets and types of investment product gains, while focusing mainly on the overall or aggregated return / risk balance of your portfolio.
To achieve attractive positive returns while keeping the overall level of risk of your investments low to moderate, it is essential to build and manage an investment portfolio with a wise asset allocation. Defining the optimal composition for your portfolio involves identifying the right ingredients and the appropriate quantity of each, based on your target return, risk tolerance and constraints - now and in the future.
Portfolio risk is only perceived and analysed with difficulty. One factor that plays a key role in controlling the risk of your portfolio is correlation, which describes how investment solutions behave towards each other. This explains why adding diversified investments in a portfolio help mitigate risks.
EUR-denominated investment grade floating bonds and bonds denominated in Norwegian Krona
Investors holding bonds with a positive return until maturity will only suffer a loss (taking into account coupons paid and redemption of capital at maturity) if the borrower defaults.
For our low risk investment solutions, we select EUR-denominated floating bonds. We focus on US auto manufacturers’ bonds, with a residual maturity of 3- to 5-years, an investment grade credit rating and a decent expected return, in our opinion.
For moderate-risk investment solutions, we focus on investment grade bonds denominated in Norwegian Krona (NOK), as we expect the NOK to strengthen against the EUR in the coming quarters (currency diversification). Finally, we select some hybrid bonds, which generally have a higher risk but also higher return.
Opportunities through alternative strategies according to your risk and return objectives
We have selected and combined the most appropriate alternative solutions depending on whether it is to avoid a negative return, protect your capital from inflation or increase it with a minimum of risk.
Our selection of solutions includes mutual funds and structured products. It allows flexible and low correlation exposure to equity and bond markets.
In addition to funds that can be used as cash substitutes, we highlight dynamically managed bond funds, multi-asset funds and long / short equity funds (with moderate long bias).
A low-risk investor may find that adding a moderate or higher-risk investment vehicle, for a limited amount, will meet his/her needs and objectives. It will improve his/her overall performance, while keeping the overall risk of the portfolio at a low level.
Discover the contribution of alternative solutions within a portfolio with this video