A real asset portfolio, that tracks, maps and positions for all four of the macro economic seasons
By diversifying exposure across four market regimes (inflation, deflation, growth and decline), allocating to investment baskets beyond the traditional – gold, commodities, trend, and volatility for example, Navigator believes investors can maximise risk adjusted returns and achieve a smoother return profile regardless of market conditions without having to compromise on performance.
Investors seeking true asset allocation diversification that offers capital appreciation and protection through all market environments: inflation to deflation, growth to crash.
Investors who believe that the Traditional 60/40 portfolio leaves them exposed over the market cycle.
Investors who are worried about the potential for large market sell offs or take comfort from having an approach focused on reducing portfolio drawdowns.
Investors who believe in accumulating wealth over the long run.
| Investing Style | Active |
|---|---|
| Allocation Type | Diversification by Market Regime Baskets |
| Apporach | Perpetual Portfolio Framework |
| No. of Risk Profiles | 4 |
| Risk Profile Calibration | Risk/Defensive Asset Split |
| Holdings Universe | UCITS V Fund & ETF Universe |
| Currencies Available | EUR/GBP/USD |
| Minimum Investment | 100,000 |
| Annual Managament Charge | 0.875% |
| Ongoing Charge Figure | 1.175% |
The Navigator managed portfolio strategies are rooted in an approach to investing we call the ‘Perpetual Portfolio’ asset allocation. The Perpetual approach seeks to diversify an investment portfolio by allocating to strategies, which we refer to as investment baskets, and asset classes that historically perform best in a given market regime. Each basket thrives in a particular market environment, but can also support returns in less optimal conditions. Weightings between the investment baskets are optimized so that the allocation is equally weighted to each quadrant: inflation to deflation, growth to decline. In being prepared for all market conditions, the perpetual portfolio allocation can navigate all market environments: improving market resilience, reducing large drawdowns and maximizing risk-adjusted returns.
(e.g. equities)
Outperform during periods of robust economic growth and thrive in low interest rate environments.
(e.g. government/corporate bonds)
Outperform during deflationary periods and thrive in falling interest rate environments.
(e.g. Commodity Trend Advisor [CTA] Strategies)
Capitalize on trends higher in asset prices during inflationary periods and lower during deflationary periods.
(e.g. precious metals)
Can act as protection during periods of decline and protect the portfolio from excessive monetary/fiscal policy.
(e.g. structured income)
Delivering defined returns whilst minimizing capital at risk except in the harshest of environments. Outperform in quiet or range-bound regimes.
(e.g. oil, grains)
Outperform during inflationary regimes and thrive when demand outstrips supply.
(e.g. portfolio insurance)
Outperform during periods of decline and benefit from a sudden/unexpected change in market dynamics.
(e.g. central bank overnight lending rates)
Outperform during risk-off periods and can enhance long term returns through dollar cost averaging.
We consistently research the means to improve upon our investing approach. One of the pieces of research we had historically come across, and sought to improve upon, was originally designed in the 1970’s by (at that point), a little known finance professional in the US called Harry Browne.
Harry Browne had a different starting point than many other investors in that he sought to define four economic scenarios (The Four Quadrants): Inflation, Deflation, Growth and Decline. He comprised an allocation that had equally weighted exposure to each quadrant:
– For Growth environments: a 25% allocation to Equities.
– For Deflationary environments: a 25% allocation to Bonds
– For Decline environments: a 25% allocation to Cash
– For Inflationary environments: a 25% allocation to Gold.
The financial world has come a long way since the 1980s. The introduction of electronic exchanges, derivatives, volatility, algorithmic trading, the list goes on. It makes for a very different investing landscape than the 1980s and had Harry Browne undertaken his work today, he would likely have utilized the tools now at his disposal. Navigator’s belief firmly rests in Harry Browne’s initial work. An asset allocation should be prepared for all economic environments, it shouldn’t need consistent market timing and by reducing portfolio drawdowns, long term returns, and wealth generation can be greatly enhanced. Navigator aims to modernize and enhance Harry Browne’s initial work bringing into the 2023 investment landscape.
An economic decline regime is characterised by a sustained period of negative economic growth, where the Gross Domestic Product (GDP) contracts over time.
As economic activity slows down, businesses may reduce their workforce, leading to higher unemployment rates and reduced consumer spending.
During economic decline, businesses may hold back on investments due to uncertainty and decreased demand, further exacerbating the downturn.
Economic decline can lead to a pessimistic outlook among consumers, causing them to cut back on spending and save more, contributing to a downward.
A deflationary regime is characterized by a sustained period of declining prices for goods and services in an economy.
As prices fall, consumers may delay purchases, expecting even lower prices in the future leading to decreased consumer spending.
Deflation can lead to reduced business investment and economic activity, as companies face lower revenues and profitability.
Deflation increases the real value of debt, making it harder for borrowers to repay loans, potentially leading to defaults and financial instability.
An economic growth regime is characterized by a sustained period of positive economic growth, where the Gross Domestic Product (GDP) increases over time.
During economic growth, businesses tend to expand, leading to increased job opportunities and lower unemployment rates.
A growth regime typically sees higher levels of business investments as companies seek to capitalize on expanding markets and opportunities.
Economic growth fosters a positive outlook among consumers, leading to increased.
In an inflationary regime, there is a sustained increase in the general price level of goods and services in an economy.
As prices rise, the purchasing power of money decreases, meaning consumers can buy fewer goods and services with the same amount of money.
Inflation can lead to demands for higher wages by workers to keep up with the increasing cost of living, potentially leading to a wage-price spiral.
During inflationary periods central banks may implement monetary policy measures like raising interest rates to control inflation and stabilize the economy.
The four quadrant approach refers to the recurring stages that financial markets and economies go through over time. It is our belief that any recorded period of economic history can be broadly described by one of these four economic circumstances: Inflation, deflation, growth, and decline. The duration and characteristics of each regime can vary significantly from one market cycle to another, and their behaviors are impacted by various factors, including fiscal and monetary policies, geopolitical events and market psychology. The key to long term wealth generation is to have a portfolio allocation that is able to navigate all four quadrants and is prepared for potentially influencing factor effects. We have found that traditional approaches are very well suited to two of these environments but not the other two leaving them exposed over large parts of the market cycle. This exposure increases the likelihood of traditional investors experiencing extended periods of wealth destruction.
Traditional assets such as bonds do well in decline, yet Gold, Trend/Momentum and volatility strategies can do well in decline and inflation. The Navigator Strategies offer a more robust defensive lineup.
20%
Volatility/Tail Risk Strategies
20%
Cash/Cash Equivalents
20%
CTA Trend
20%
Gold
20%
Government Bonds
