Paul Byrne, BNY Investments Newton Portfolio Manager and Quantitative Analyst, outlines how BNY’s FutureLegacy risk-targeted multi-asset funds aim to help investors stay aligned with their retirement goals in uncertain markets.
Key takeaways
- Against an uncertain market backdrop, BNY’s FutureLegacy multi-asset fund range has been designed to help investors stay aligned with their retirement goals by combining attractive return potential with disciplined risk management.
- The funds manage risk dynamically through changing market conditions via a transparent, research‑driven process spanning strategic allocation, careful security selection and tactical positioning.
- A focus on capital preservation, securities with strong fundamentals, and precise risk control aims to give clients greater confidence as they navigate a complex retirement landscape.
Clients approaching or living through retirement are increasingly considering the potential investment risks just as much as the rewards. Investors are facing a financial landscape shaped by uncertainty, as markets grapple with ongoing geopolitical shocks, stubborn inflation, uneven global growth and fast‑moving policy decisions. All these factors can influence both short‑term sentiment and long‑term return expectations.
This is prompting many investors to look for investment approaches that work harder to control risk without sacrificing the opportunity for meaningful returns. BNY’s FutureLegacy fund range, introduced in 2023, was developed precisely for this purpose.
These actively managed multi‑asset funds aim to deliver attractive returns while dynamically managing risk. This combination of opportunity and discipline aims to support clients who want greater confidence amid a world where the economic and market outlook can shift rapidly.
The five funds in the FutureLegacy range are each managed to a distinct risk level, with risk ratings remaining within the client risk bands 3-7, as measured by the UK’s leading risk-based financial planning system from Dynamic Planner.[1] This allows the funds to align with the differing risk appetites of investors, with each fund having an appropriate mix of equities, bonds and cash.
A disciplined process for managing risk and return
Central to how the FutureLegacy funds manage the balance between risk and reward is a robust, structured and repeatable investment process developed by multi-asset specialists at BNY Investments Newton. At the heart of this process is multidimensional research that examines every asset class through multiple lenses.
Deep fundamental analysis forms the foundation of decision‑making, supported by thematic research, quantitative tools and other specialist inputs such as responsible investment and geopolitical research. Together, these elements provide valuable insights that help the team understand investment opportunities and risks at both the asset‑class and security level.
A disciplined approach to strategic asset allocation uses proprietary quantitative modelling to determine the optimal mix of equities, fixed income and cash for each fund, ensuring alignment with the appropriate risk rating. The funds are directly invested, and security selection – which is expected to be the biggest contributor to returns – gives the team full visibility of the risks and opportunities within each portfolio, allowing them to invest with conviction.
This strategic allocation approach is complemented by a tactical asset allocation overlay that focuses on near‑term market conditions. Using simple derivatives, the investment management team can implement directional positions quickly and efficiently. This flexibility helps them as they seek to capture returns in rising markets while, crucially, focusing on capital preservation during periods of market stress or drawdowns.
Each fund in the FutureLegacy range is continuously monitored and regularly rebalanced to control volatility and keep the fund within its pre-defined risk parameters.
The funds’ managers aim to ensure that the funds perform consistently as a range and against client expectations. In particular, the funds are constructed and managed so that lower-risk funds have a higher tilt towards capital preservation while higher risk-funds have a greater growth tilt. The chart below shows the risk/return profile of the five funds since their inception in February 2023.
Created to meet retirement income requirements
The FutureLegacy funds include several features designed to address the challenges clients face when planning for retirement income. By investing directly in individual securities, rather than adopting a fund‑of‑funds approach, the investment team can measure and manage risk more precisely. This greater transparency and control can aid more effective downside‑risk mitigation.
Furthermore, the equity allocation within the FutureLegacy range is positioned to balance income and growth characteristics. With the expectation of a structurally higher interest‑rate and inflationary environment, we believe that income will play an increasingly important role in generating total returns for clients. Equities with reliable dividends have historically been associated with lower volatility and reduced downside risk.
On the fixed‑income side, the portfolios actively manage duration (sensitivity to changes in interest rates) and credit risk with a strong emphasis on capital preservation. This approach is particularly relevant for the lower risk portfolios, which hold a higher proportion of fixed interest. It aims to give confidence to clients who prioritise limiting downside risk, especially those seeking greater security to support near‑term income needs.
Building confidence for long-term retirement goals
As clients navigate an increasingly complex retirement landscape, the FutureLegacy fund range is designed to give them greater confidence that their investments remain aligned with their long‑term goals. By combining disciplined risk management, forward‑looking research and a dynamic, transparent investment process, the funds aim to provide a smoother journey through shifting market conditions. Ultimately, FutureLegacy seeks to help clients align outcomes with expectations, balancing protection with the potential for meaningful returns.
[1] The BNY Mellon FutureLegacy funds are actively managed, typically by using forward-looking expectations of volatility. In doing so, the Investment Manager uses its own internal risk model, while also considering external independent risk profiling methodologies. Based on a risk profile scale of 1 (lowest) to 10 (highest), the funds target a risk profile of 3, 4, 5, 6 or 7, but this is not guaranteed. The risk profile targeted by each of these funds can be identified through the number included in the respective fund name. This risk profile is not the same as the risk and reward category shown in the KIID. The risk profiles are assessed against the risk rating scale provided by Dynamic Planner but are subject to change. Dynamic Planner Risk Ratings should not be used for making an investment decision and it does not constitute a recommendation or advice in the selection of a specific investment or class of investments.
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For Professional Clients only. This is a financial promotion. Please refer to the prospectus or KIID where applicable and other fund documents for a full list of risks and before making any investment decisions. Go to bny.com/investments.
Any views and opinions are those of the investment manager, unless otherwise noted. This is not investment research or a research recommendation for regulatory purposes.
For further information visit http://www.bny.com/investments
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