Capital Ideas^TM

2022 has been one of the most volatile periods in recent years for global equity and fixed income markets. The outbreak of the war in Ukraine, global supply chain disruptions, global inflationary pressures, less accommodative central banks and COVID-19 restrictions in China have all weighed on investor sentiment. In times of uncertainty, it may seem prudent for investors to spread their investments across multiple asset classes. Julie Dickson discusses the multi-asset approach behind Capital Group Global Allocation Fund (LUX) (CGGA) and explores ways to navigate the current economic environment.

CGGA invests in both equities and fixed income securities. How has this multi-asset approach to investing helped support the fund, particularly during periods of volatility?

CGGA is a bottom-up, global multi-asset portfolio that invests in equities and high-quality fixed income securities with the aim of long-term growth of capital, conservation of principal and income. Clients can typically expect between 45-75% of assets in equities with a discipline to stay invested even in tough markets; and around 25-55% in fixed income, primarily investment-grade bonds, to limit the potential downside.

The unique approach to multi-asset investing at Capital Group, combined with a long-term investment approach, means that investors can access a portfolio that has been consistent and stable over time and is always investing in both stocks and bonds.

As shown in the chart below, during periods of market stress with sharp equity market correction, CGGA has proven to be relatively resilient compared to the MSCI All Country World Index.

This multi-asset approach to investing has resulted in an excellent track record of attractive risk-adjusted results. Since launch on 31 January 2014, CGGA has been among the top-quartile funds on both a three-year rolling return and a three-year rolling Sharpe ratio¹ perspective. The fund has delivered an annualised lifetime return of 4.8%², outpacing the peer group median of
2.7% ³.

1. Sharpe ratio: a measure of risk-adjusted returns which compares an investment’s excess return to its standard deviation.

2. As at 30 June 2022. Net of management fees and expenses for the Z share class, as a representative share class.

3. As at 30 June 2022. Morningstar Peer Group is (5-95%): EAA Fund USD Moderate Allocation (oldest share class). Source: Morningstar

4. Capital Group Global Allocation Fund (LUX) monthly returns. Net of management fees and expenses for the Z share class, as a representative share class.

5. The index shown is MSCI All Country World Index (net dividends reinvested). Down market defined as when the index falls more than 10%.

6. Recovery is defined as the time taken for the index value to return from the point of its maximum drawdown to its position before the drawdown started.

7. Excess returns are calculated arithmetically.

 

• The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
• Past results are not a guarantee of future results.
• If the currency in which you invest strengthens against the currency in which the underlying investments are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
• The Prospectus – together with any locally-required offering documentation – sets out risks, which, depending on the fund, may include risks associated with investing in fixed income, derivatives, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.