Multi-Asset Class Strategies: How Do I Use Thee? Let Me Count The Ways.

Executive Summary

Not too long ago, investors, consultants, and advisors in the asset management field struggled with the role of Multi-Asset Class (MAC) strategies. They were perceived as misfits, given their crossasset mandate and their dynamic nature. Today, however, they are utilized and embraced in all sorts of different settings. Given our large footprint and multiple decades of managing MAC strategies, we looked at our client base and determined that there are five (six, if you count their use in Target Date Funds as a distinct usage) “buckets” that represent the ways in which investors appear to be using them: 1) Liquid Alternatives; 2) Core; 3) “Swing” Manager (in both a traditional policy benchmark setting, or as part of a Target Date setting); 4) Liability Driven Investing + Diversified Growth; and 5) a Real Return Strategy. This paper helps explain the driving rationale for each.


Once perceived as misfits for investors, Multi-Asset Class strategies are now used for all sorts of portfolio solutions.

Not too long ago, investors, consultants, and advisors in the asset management field struggled with the role of Multi-Asset Class (MAC) strategies, because these products, at first blush, appeared nonsensical. They were misfits. Professionals who had been trained to think in terms of well-defined style boxes, tracking error metrics, benchmark-centric frameworks, and formal re-balancing disciplines were often flummoxed by products that not only had multiple and varied risk exposures, but whose risk exposures could vary through time. MAC strategies triggered a barrage of pointed questions:

■ “Where do they fit?”

■ “How do I know what you’ll own next quarter? You’re constantly changing your stripes.”

■ “How do I measure you? How do I know if you’re any good?”

■ “How can I model you in a Mean Variance Optimization exercise?”

■ “Where do I source capital to fund this thing? Is it more like equities? Fixed income? Cash-plus? Alternatives? What is it, exactly?”

That was then, this is now. Today, MAC strategies are well-established in both the psyche and practice of investment management. Ironically, the industry now has a different problem: MAC strategies are employed in such a wide variety of situations that anybody getting up to speed on them might be paralyzed as to how to actually begin to think about them.

We thought we could lend some perspective. While we are not the only asset management firm in MAC space, we have been at it longer than most. Our first strategy launched in 1988, giving us three decades’ experience of witnessing the different ways clients and their advisors and consultants have implemented these strategies. GMO’s Asset Allocation team manages a variety of MAC strategies with varying objectives and constraints; combined, we have over 450 MAC clients worldwide.