Tactical Asset Allocation Strategies

M&G Investments was one of the first investment management companies to offer tactical asset allocation as a stand-alone service, both in the UK and in South Africa, and consequently now has one of the most experienced asset allocation teams within the industry worldwide.

We manage several mandates for clients that seek to add to overall fund returns through TAA. These mandates are typically managed for large retirement funds that operate a specialist (rather than a balanced or multi-asset) investment strategy. This offering is currently only available on a segregated basis.

Tactical Asset Allocation (TAA) is the intentional deviation away from a fund’s long-term strategic asset allocation benchmark to benefit from the periodic market mispricing opportunities at asset class level. TAA is independent of the funds’ strategic asset allocation (SAA) or current asset allocation.

We offer several TAA ‘overlay’ mandates where we aim to add value at a total fund level by exploiting asset class mispricing using futures instruments to buy or sell asset-class indices. The TAA manager implements overweight positions in cheap asset classes and underweight positions in expensive asset classes.

For example, the TAA manager will be overweight bonds if current bond yields exceed the manager’s assessment of “fair yield”. This “fair yield” can be broadly defined as the equilibrium return expected to be earned from the asset class over the long run through various economic cycles.