This multi-asset fund managed by Lombard Odier Asset Management uses a systematic methods to generate a steady performance while preserving capital.

This product, launched in 2012, uses a long-only investment strategy applied to a multi-asset universe, including equities, sovereign and corporate bonds (in both emerging and developed markets) and commodities through liquid instruments. Implementation of the strategy increases diversification by building exposures to traditional and alternative risk premia in a systematic, liquid and transparent manner such as carry trades on bonds or currencies for example.

But its originality is coming from an allocation process based on risk and not on capital.

To do that, Aurèle Storno, the fund manager, uses systematic methods with the following three principles:

• First, it should not be assumed that each asset class must contribute equally to risk.

• Secondly, it is not a matter of defining "once and for all" risk allocation on the basis of long-term volatility. For example, « if bonds have a volatility of 5 % over the long term, but have recorded a 10 % peak in recent months, weighting them on the basis of volatility at 5 % does not make sense» says Aurèle Storno.

• Finally, the overall leverage level of the portfolio should not be defined "once and for all" because « when the volatility and correlations across markets are high, the same return can be generated with a less leverage» he adds.

These three elements, applied in a systematic way, define the risk process allocation.

For the time being, the results seem to be there with an annualized return of 3,55 % and a volatility level of 4, 79 % from inception, giving a Sharpe ratio of 0,74 [1].