Choosing the right fund

Flexible management encompasses very different approaches depending on the asset management company. There's no one-size-fits-all model. For example, total flexibility allows managers to vary the proportion of equities from 0 to 100%, but this flexibility can also be partial (20/80 or 30/70). 

Before investing, assess the fund's risk profile

Some funds use only two asset classes: equities and money-market instruments, for example. Others are going to play on all registers: equities, bonds, money-market instruments, commodities, currencies as well as on a broad-based geographical allocation (Europe, United States, Asia and emerging countries).

As flexibility can vary from one fund to another, one must read attentively the information contained in the prospectus of each fund to fully understand the fund's performance drivers as well as its management process. Furthermore, it is important to read the “Key Investor Information Document”, or KIID. The KIID provides investors with essential information about the fund itself.  

It is not a promotional document.  The information contained therein complies with a legal requirement, the purpose of which is to help you fully understand the fund as well as the risks associated with investing in the fund. It is recommended that you read it in order to be fully informed about whether or not to invest.

What's more, the SRRI indicator in the KIID also makes it possible to assess the fund’s risk profile. A category 3 fund, for example, is supposed to be less risky than a category 5 fund. But the prospectus and the KIID, though necessary, are insufficient for making an informed decision.

Flexible portfolio funds or flexible offensive funds?

Some funds may be very cautious without any volatility restriction appearing in the prospectus; others may be very dynamic and close to an equity profile. Therefore, defensive flexible portfolios, can be distinguished, on the one hand, and offensive flexible ones, on the other. In addition, some funds cover specific and different geographical areas (e.g. Europe, emerging countries, etc.), while others cover the world. The investor must be able to choose his/her flexible fund based on his/her investment horizon, performance objective, and especially the risk he/she is willing to be exposed to in said geographical area(s). If it's an option for you, it's always best to discuss this with your financial advisor.

You must assess whether there is a discrepancy between the theoretical limits (0 to 100% for example) and the limits managers actually use, sometimes closer to 20 to 80% or 40 to 60% depending on the type of fund.

Sustainable performance

One must also question other criteria such as the management team and the experts in charge of your assets, study past behaviour of the fund in different market configurations, check that the asymmetrical behaviour of the fund is indeed real, and ask whether this fund performs better during market upturns or downturns.

Lastly, we can’t stress enough the importance of the minimum recommended investment period indicated in the fund prospectus (often between 3 and 5 years depending on the fund). The minimum investment period can sometimes turn out to be a better risk indicator than the investment limits. 

Performance is assessed over this minimum period and not over a day, week or month, etc.

Let us provide you with a customized discovery by giving us some clarification.

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