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MM debate: Asset allocation fundamentals remain unchanged

The fundamentals of asset allocation in relation to risk have not changed as a result of the credit crunch, according to panellists at the Money Marketing RDR & Economic Update debate.

Speaking at the debate today in London, Bluefin group director of research and product development David Cartwright said people have just taken more notice of the risk of asset allocation as it has become more visible.

Cartwright said the likes of counterparty, money market and currency problems have all introduced a new type of risk to the IFA business.

“We as a business are focused on asset allocation and investment risk and as an industry we have not focused closely enough on institutional risk that we have to consider through the likes of structured products among other areas.”

Taxbriefs editorial director Danby Bloch said: “Clearly the risk was always there we just didn’t see it. Past performance is not always a future guide, particularly recent past performance. It seems to me our perception of risk needs to change quite considerably as we have accepted the traditional financial theories without acknowledging that things simply happen in markets.

“We are now in a different market, but again there will be opportunities and in five to 10 years time the likes of equities and corporate bonds are likely to look cheap historically.”

Seven Investment Management marketing director Justin Urquhart Stewart says: “There is a focus on a short-term issue of a long-term event. Risk management tools that IFAs are given such as ‘sarcastic modelling’ tools are astonishingly inflexible and are all about carrying out the investment process without looking at the risk process. The biggest problem we do have is the poor sentiment that we are continually doomed instead of realising those that are still working are better off. Trust and confidence is the key.”

The RDR debate day has been sponsored by Aegon , Prudential and Clerical Medical

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