A successful managed account portfolio must balance model outputs with professional judgement and insights, says Andrew Yap, head of portfolio solutions at Zenith Investment Partners.
Mr Yap says while quantitative models provide an important input into the portfolio construction process, real-world insights are essential to navigate the uncertainties of the current market environment.
“Models give you the numbers, but they can’t always tell you how markets will behave. Human judgement and insights are what turns data into resilient portfolios that can withstand unexpected shocks, which is especially important in today’s environment,” Mr Yap says.
“Will it be a smooth ride, will we hit a recession, or is a sudden boom around the corner? This is where the experience and expertise of investment professionals make all the difference and can be what turns a good plan on paper into a resilient portfolio that can weather real-world storms."
Zenith uses deep insights from its internal investment research team and asset allocation experts to apply qualitative insights to refine its customised portfolios to meet a broad range of client objectives.
“Our investment research team is an essential part of the process, as it’s critical that we ask what they are seeing from the coalface. They act as a valuable sounding board for the portfolio construction process to test active views and to aid in the selection of primary and back-up fund managers with confidence,” says Mr Yap.
“A managed account provider with access to contemporary insights can produce a more robust long-term outcome. They will consider current market intelligence including emerging trends, sector specific themes and the team’s high conviction views, which helps keep the chosen portfolios ahead of the curve,” he said.
Mr Yap added that the need for qualitative judgment is even greater in less liquid investments such as private assets, and that the future of portfolio management lies in blending both data and deep professional insights.
"With private assets, we need to explain both the numbers and the story," Mr Yap says.
"The data is powerful, but it has to be paired with a transparent conversation about the risks, the long-term commitment, and the importance of choosing the right manager.
"The future will be about weaving them together and giving us the confidence to stay calm when markets are shaky and the situation changes."
Managed accounts have become a mainstream investment offering over the last decade as financial advisers and their clients realise their many benefits, including improved efficiency, scale and cost advantages. Zenith currently manages more than $6 billion in client assets across both customised and public menu managed account portfolios.
