The original sterling version of the fund was launched in the UK in 2004, based on two strong beliefs. The first was that while a global trend towards specialist mandates was based on sound “best of breed” theory, there had been an unintended consequence from this trend, namely a loss of overall investment perspective. The second was that the “great moderation” era of reduced volatility and stable business cycles, which began in the mid-1980s, was ending and investing was returning to a more normal environment of lower returns and higher volatility. 

What are its key investment criteria? 

The fund takes an active unconstrained multi-asset investment approach seeking to deliver net positive real returns over the long term. It has the flexibility to use a range of assets and there is a strong emphasis on capital preservation.
 
It consists of a return-seeking core of investments with the characteristics we believe suit the current environment. Around the core, risk-offsetting positions of various kinds can be adopted, to help dampen volatility and seek to provide an element of downside risk, while direct and indirect hedges can be used in an effort to stabilize the portfolio. The fund looks to generate modest, positive returns above cash over a five-year period; in doing so, the fund aims to achieve a positive return on a rolling three-year basis. However, a positive return is not guaranteed and a capital loss may occur. 

How has the fund performed over the past one and three years, and in the year to date? 

Over one year to the end of June 2016, the GRR Fund Class I returned +8.03 per cent, while over three years it had returned +5.82 per cent on an annualized basis. So far in 2016 , the fund has returned +8.11 per cent all net of fees. 

How do you view the current US investment landscape in terms of opportunities and threats for high net worth/ultra high net worth investors? 

We take a long-term perspective in investing and generating wealth for its clients. Being patient, having patient capital and only investing when an individual business/security is below its intrinsic value creates the best opportunity in our view to growing wealth over the long term. 

Our mantra is to avoid investing passively, invest very selectively, and understand what you own and why you own it. Extraordinary policy response to the global financial crisis has created, in our view, unintended consequences including that of financial asset price inflation, a great deal of uncertainty and significant market volatility. 

Volatility creates opportunity to grow one’s wealth but with it comes the risk of drawdowns. We see most asset classes as being expensive at a general level: equities, bonds, house prices and even art, driven by “cheap” money in search of yield and income. 

This is not just a US phenomenon but a global one. Fiat money is being debased for countries to be competitive and to grow. We think real assets such as gold are more likely to hold their value; gold certainly can’t be printed and there is only a finite amount. 

Real businesses with real cash flows and income streams that are priced below intrinsic value with attractive characteristics are, to our mind, other potential opportunities both from an equity and debt perspective. 

We see opportunity in healthcare, media, technology, precious metals and infrastructure-related securities and are careful to avoid financials and industrial commodities that are threatened by the low-growth, deflationary backdrop.

How can the strategy help these investors deal with the low bond yield environment and stretched equity valuations?

The strategy is an unconstrained multi-asset approach that invests globally. As such, the opportunity set is very broad, reaching beyond the home market of the S&P, not only investing in equities and bonds but also in other areas including precious metals, inflation-linked and infrastructure-related securities, and using cash, currency and insurance to seek to preserve capital and reduce volatility. Its flexibility at an asset-class level and hands-on management approach means it can try to take advantage of current market volatility and select individual opportunities that we believe offer good intrinsic value without necessarily buying into equity or bond indices that we think are generally very stretched. 

The aim of the strategy is to outperform in real terms and minimize losses over a full business cycle; probably the objective of most HNW/UHNW investors. The strategy, as opposed to hedge funds, for example, provides the comfort of being transparent, highly liquid with a NAV, and not using leverage at a total portfolio level. We believe a simple pragmatic approach that is easy to understand and easy to explain should help these investors navigate the challenging investment backdrop of low yields and stretched equity valuations.  

How is the strategy approaching the possibility of a potential rate rise environment and the return of inflation further out?

We have taken advantage of significant market moves to tactically trade our exposure to long-duration government bonds, and also to add some short-dated US Treasuries for cash management purposes. We are not overly concerned that inflation is currently a significant risk, but the recent implementation of some options on the US long bond future, and similar positions on the Euro-Bund future should, we think, offer protection should inflationary concerns materialize further out. 

What role can alternatives play in supporting UHNW and HNW investments and how can a strategy like GRR help them to achieve their aims? 

Alternatives can act as an effective diversifier in UHNW and HNW portfolios. Within multi-asset portfolios, for example, soft commodities can be used as a diversification tool as they tend to be less correlated with business cycles or financial risk than industrial and energy commodities. 

Soft commodities are also supply-constrained, with production limited by the amount of arable land available and competition between crops, as well as continuing adverse weather conditions and water constraints affecting supplies. We think gold, too, can be used as a hedge against a very wide range of outcomes, as well as against the policy errors of the authorities and against currency debasement. In the event of future inflation, we see it as being a potential store of value, and useful in seeking to preserve capital, but we believe it can also work in a deflationary environment.

What considerations should our readers keep in mind as they determine which types of alternative investments make sense for their portfolios?

We advocate that investors should look for established teams who have been investing in multi-asset strategies for a long time, and who can demonstrate a stable and repeatable process with low turnover and consistent performance through different stages of the cycle. The GRR strategy, which predates the Dreyfus GRR Fund, has been through three distinct market phases since launch: an equity bull market between 2004 and 2007; the global financial crisis of 2007-2009; and the recovery stage since 2009. We regard some of the more established strategies as having continued to demonstrate better risk management through the different market cycles.