Investment Strategy Forum 2022 | [i3] Investment Innovation Institute | 4 May 2022 | RACV Torquay Resort, 1 Great Ocean Rd, Torquay VIC 3228, Australia

Strength in defence
Wombats are strong animals with long claws and sharp teeth. But the most notable strength lies not in its aggression and ferocity, but rather its ability to defend itself.

A unique feature of a wombat is its reinforced rear, which is an excellent defence against predator attacks. When faced with danger, it dives headfirst into a tunnel, blocking the entrance with its sturdy rump, which is mostly made of cartilage and hence capable of withstanding predator attacks.

Regime shift?
As investors anticipate a world of lower expected return, heightened inflation, increased conflict and undue government interference, it is imperative to question whether traditional capital market assumptions and models continue to hold true.

In the midst of disruption and secular changes, how do investors continue to build a robust investment strategy in an environment that is often uncertain, volatile and potentially fragile?

Increased risk appetite
Inevitably, investors are expected to embrace higher risks, though calibrated accordingly to the individual fund objectives and appetite.

These may include:
• Higher tolerance of illiquid assets
• More dynamic and flexible strategies
• Pursuing high conviction, opportunistic and idiosyncratic exposures
• Higher propensity to access skill-based investments

Reinforcing risk framework
Correspondingly though not often intuitively, the governance framework and capacity to manage risks need to be enhanced significantly.

While it’s obviously difficult to predict expected outcomes, how can investors design an equally robust risk management overlay – comprising decision-making processes, operating systems, data infrastructure as well as team culture – to withstand various plausible scenarios?

Like the wombat with its reinforced rump, what protection levers are available for deployment in a portfolio?

Portfolio Construction Challenges
Under a cloud of uncertainty, we look forward to convening the annual investment strategy forum for Chief Investment Officers and Portfolio Strategists, to ponder the portfolio construction challenges in a post-COVID investment environment.