Consistency doesn’t have to be boring!

At 8AM, we believe that the most crucial aspect in getting value from any retail investment, is consistency.

Many multi-asset managers still use Tactical Asset Allocation (TAA) as their primary point of differentiation with many demonstrating outperformance. However, the vast weight of research shows that it is nigh on impossible to do consistently in a human-led investment process.

Our view is that TAA is generally flawed when it is; human-driven, short-term in nature, seeking upside capture rather than capital preservation and driven by bigger predictive ‘calls’.

It is a commonly held (and understandable) misconception that humans predicting short-term market movements leads to consistent alpha over the longer term. This is simply statistically untrue. Not on average across the history of active retail or self-directed investing.

Active managers the world over fail to beat benchmarks over meaningful timeframes. Yes, this sweeps together a multitude of investment approaches, but tactical calls run through the MOs of many a portfolio manager to this day and the results are not sweeping andconsistent alpha outside of singular ‘trend-bucking’ examples.

Successfully predicting and then accessing the ‘turning point’ of any given investment factor or theme, within a timeframe that itself doesn’t erode upside (by nature of being “early”), based on human intuition and deployment of technical analysis, is statistically exceptional. Yet, this is the stock and trade of most multi-asset investment managers.

And unfortunately, compounding works both ways if a manager tries to unwind an active tactical position. A manager makes a call, it backfires, leading straight into chasing the loss trying to remedy the error, using the same flawed strategy as created it. The only thing that compounds is relative underperformance.

Consequently, at 8AM we’re strategic, and we only tilt our short term allocations based on consensus from the best crowd-sourced investment teams; we don’t sit and discuss macro trends and potential market events in order to outwit them.

8AM AQ Model portfolios have a passive base, with quant-screened active allocations when value is clear. We’re no naysayers of active management but it’s use must be managed and data-driven. Speak to us to find out how we can help manage your client portfolios


Read more

20 Jan 2025

Market Matters 20 January 2025

Read more

13 Jan 2025

Market Matters 13 January 2025

Read more