With the ups and downs of the public market in 2021, how to formulate an appropriate public market investing strategy has become a hot topic. Based on the analysis of public funds’ allocation strategies and performance in 2021, the key to public market investment lies in maintaining a balanced configuration of stability and flexibility. On the one hand, the state has provided policy support for public market investment. On the other hand, there are still opportunities despite risks in the macro environment. Therefore, the recommended public market investing strategy is to increase allocation to fixed income products with strong stability and flexibility, while also paying attention to deep value and high dividend strategy products, so as to balance offense and defense.
Public market investing strategy should focus on stability
The public market experienced volatility in 2021, with fluctuations in the categories of stocks, bonds, funds, etc. However, public funds generally maintained moderate positive returns through active allocation, reflecting fund managers’ ability to balance stability and flexibility. For example, equity-biased funds outperformed similar pure equity funds, while bond-biased funds underperformed pure bond funds. This shows the power of balanced allocation. In addition, maintaining adequate bond positions provided a stability buffer amid market fluctuations. Therefore, for public market investing in 2022, increasing allocation to fixed income products with strong stability should be the key focus.
Pay attention to flexibility and seek alpha opportunities
While stability is important, having certain flexibility in allocation strategy can allow investors to capitalize on alpha opportunities. The public market offers chances to invest in deep value and high dividend products, which can generate excess returns. However, investors need to be prudent in selecting experienced managers that have gone through full bull-bear cycles. Moreover, some alternative strategies like quantitative hedging/absolute return may be considered, as long as they have solid long-term track records and effective risk control.
Balance offense and defense
A balanced offense-defense configuration is the key to public market investing. On the defense end, adequate fixed income allocation provides stability buffer during market swings. On the offense end, value and dividend products as well as flexible alternative strategies allow seizing alpha opportunities. The exact allocation proportions can vary based on personal risk appetite. But the overall principle is balancing stability and flexibility to generate steady positive returns over the long run.
In summary, the recommended public market investing strategy is to increase allocation to fixed income while retaining flexibility to pursue alpha opportunities, balancing stability and flexibility in an offense-defense configuration.