Multi-strategy investing and the COVID crash: Resilience and redemption?

The COVID-19 pandemic has brought many things into focus, reminding investors of the shock of a market crash. With bond and equity prices already back at levels that seem to belie the harsh economic reality, Peter Fitzgerald and Mark Robertson believe it could be time to reconsider absolute return multi-strategy investing once more.
It is a familiar story. Markets rally, a long bull run ensues, and investors forget the value of downside protection in their portfolios. Those that do hold firm begrudge the performance drag on their overall returns; most, however, either succumb to short-term financial amnesia or get swept away with the buying herd – either way, they sell out of defensive positions and strategies.
That explains one side of the multi-strategy story of recent years. The other side, of course, is one of a sector marred by underwhelming performance and missed return objectives. Who can blame the sellers, some might ask? It’s a reasonable question. And then a global pandemic hits and the ensuing market rupture offers a chance for redemption.
For end clients, the future of the multi-strategy sector really matters. This is not a theoretical debate. As more and more individuals have control of their own retirement destiny with defined contribution pensions as opposed to defined benefit pots, the risk of them crystallising losses at inopportune moments is significant and growing. In this article, we assess the outlook for multi-strategy investing and explore where and how it might need to evolve.

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