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    Tactical Asset Allocation

    Tactical Asset Allocation (TAA) is the intentional deviation away from a fund’s long-term strategic asset allocation benchmark, in order to benefit from the periodic market mispricing opportunities at asset class level. We operate several TAA ‘overlay’ mandates where we aim to add value at a total fund level by exploiting asset class mispricing through the use of futures instruments to buy or sell asset-class indices.

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    What is Tactical Asset Allocation (TAA)?

    TAA is the intentional deviation from a fund’s long-term strategic benchmark to benefit from periodic mispricing opportunities at an asset class level. TAA is independent of the funds’ strategic asset allocation (SAA) or current asset allocation. The TAA manager aims to add value at a total fund level by implementing overweight positions in cheap asset classes and underweight positions in expensive asset classes. For example, the TAA manager will be overweight bonds if current bond yields exceed the manager’s assessment of “fair yield”. This “fair yield” can broadly be defined as the equilibrium return expected to be earned from the asset class over the long run through various economic cycles.

    M&G Investments’ expertise in TAA

    M&G Investments was one of the first investment management companies to offer tactical asset allocation as a stand-alone service, both in the UK and in Southern Africa, and consequently now has one of the most experienced asset allocation teams within the industry worldwide. This skill base was transferred to the South African office in the late 1990s.

    TAA Mandates

    M&G Investments manages several mandates for clients that seek to add to overall fund returns through TAA. These mandates are typically managed for large retirement funds that operate a specialist (rather than a balanced or multi-asset) investment strategy. This offering is currently only available on a segregated basis.

    Tactical Asset Allocation