Morningstar head of portfolio management Dan Kemp has branded risk targeting strategies "lunacy", saying they force managers to sell assets at a time when investors will lose the most money.
Risk targeted funds attempt to expose investors to a specified - and relatively constant - amount of risk, as measured by volatility. Funds using the multi-asset strategy, around since about 2009, have proved popular among advisers since the Retail Distribution Review as a way to meet Financial Conduct Authority (FCA) rules around suitability. However Kemp (pictured) described the style of portfolio management as "very neat, but it doesn't work". "Risk targeting is lunacy. To stay within volatility parameters you end up always selling at the bottom," he said. "If there is a corr...
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