Getting Into the Mind of an Asset Allocation Portfolio Manager

Tariffs, interest rates, recessions, and inflation. These are all but a few thoughts people consider when trying to make sense of what is happening today and what could happen tomorrow in the economy – and by extension – financial markets. Distilling all the information related to these factors and trying to decide where and what to invest in can be a daunting task – even for professionals. This is why asset allocation portfolio solutions are hugely popular today. Investors hand over all the research and decision-making responsibilities to a team of investment professionals who divide up an investment portfolio across various asset classes, including stocks, bonds, and cash.

In an effort to get a better understanding on how the recent economic developments impact investments, particularly asset allocation strategies, we chatted with Jing Roy, Vice President & Director, Portfolio Manager, Asset Allocation at TD Asset Management Inc. (TDAM). Jing also provided some helpful insights on her career and experiences in the investment industry. 

Getting to know Jing

Jing joined TDAM in 2014 and in her current role as a Portfolio Manager with the Multi-Asset Portfolio Management Team, she manages the global strategic, tactical and absolute return asset allocation strategies for the firm's managed solutions. She is experienced in global asset allocation, portfolio construction, fundamental equity analysis and cross-asset derivatives with macroeconomic overlay. She was previously a member of the Fundamental Equities Team covering the Global Materials sector. Prior to joining the firm, Jing was an experienced sell-side Equity Research Analyst covering Materials, Industrials, Telecom and Healthcare sectors. Jing holds a B. Comm. from the University of Toronto, an MBA from Rotman School of Management at the University of Toronto and is a CFA charterholder. She is also a Commodity Trading Manager.

Before we get into questions about equity markets, can you tell us a bit about your career path to where you are now?

Growing up, I wanted to be a developmental economist to find ways to improve people's lives, but life took a different turn. Instead, I became an equity research analyst covering Materials, Industrials, Telecom, Healthcare, and Special Situations. I also had a stint in Investment Banking. My experience gave me depth and breadth in equities, derivatives, and macro strategies. It also molded me into a strategic thinker who can create optionality and build resilience in portfolios to give investors a smoother investment experience in choppy markets. This helps investors stay invested so that they can buy their first house, enjoy their retirement, and leave a legacy to their loved ones. In a way, life has come full circle since I found the same sense of fulfilment in a different profession.

With everything that’s going on in the economy today, is there anything that changes your approach to asset allocation?

I would say that there are two new developments in the way we approach asset allocation. First, with the democratization of Alternative Assets, investors now have access to more tools to weather market uncertainties than ever before.  Alternative Assets typically offer investors additional returns to compensate them for holding less liquid assets.  This unique source of return helps the asset class generate returns that are less correlated with traditional equities and bonds. As a result, adding Alternative Assets to a traditional portfolio provides investors with the opportunity to improve overall portfolio returns without having to overreach for risk.

Second, investors are looking for more certainty around a stated investment outcome especially when they are faced with more financial constraints later in life. To achieve that without giving up too much return potential, investors need to access the right assets at the right time through active portfolio management.  It also requires the use of derivatives to reduce the likelihood of large drawdowns and engineer a more favourable risk/reward profile. As a result, helping investors secure their long-term financial goals is more about generating consistent returns over time to stay ahead of inflation and head off longevity risk, and less about picking the stock with the highest return in any given year.  

What would you say gives you the most optimism over the next 12 months and what worries you the most?

In the next twelve months, I am excited about the prospect of economic rejuvenation in Europe and Canada. The enormous uncertainty around trade and sovereignty brought by the Trump administration is galvanizing the political will for self-determination in the two regions. Europe, led by Germany, is ahead of Canada in tabling pro-growth policies to counter fraying Atlanticism¹. In Canada, policy platforms of both Conservative and Liberal parties look to boost productivity by removing regulatory barriers, reducing tax burden, and encouraging investments. This is a historic moment for Europe and Canada to rise up to the challenge. If successful, the two regions can deliver attractive equity returns in the next twelve months.

On the flip side, what worries me the most in the next twelve months is the Trump administration's attempt at reshaping domestic institutions and global economic order. The administration not only looks to extend executive power over independent federal agencies, it also demands financial relief from U.S. trading partners for providing a defense umbrella and reserve assets. A disorderly dollar devaluation would be a real challenge to risk assets globally.

What would be the most important thing you have learned about investing throughout your career?

Witnessing the Asian Financial Crisis and taking a front row seat during the Global Financial Crisis are formative investment experiences for me. I observed that elite investors tend to share three attributes.  First, they are expert at pricing risk, sizing positions, and managing risk. Second, they ruthlessly challenge every assumption behind their investment thesis. Lastly, they are multidisciplinary and draw on knowledge from disparate fields to form insights and drive returns.

The good news is that investors do not need to be in that rarified group to invest and have a fair shot at financial security. To keep things simple, the key is to understand your return objectives and risk tolerance, curate a well-diversified portfolio, and stay invested for the long-term.

What keeps you busy when not focused on markets?

Besides investing, I love music and reading. I also love planning the most thrilling, outrageous escapades with my nine-year-old daughter.

¹Source: Bloomberg Finance L.P March 14, 2024.

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