Asset Allocator recently visited one of the more glamorous side streets behind London Bridge station to catch up with Aurele Storno, the Swiss-based chief investment officer for multi-asset at Lombard Odier to hear about how he sees markets right now and he is positioning the portfolios he runs.

Storno says one of the challenges faced by allocators in recent years has been that defensive portfolios have performed much worse during periods of market turbulence than higher-risk strategies. 

Our readers of course know a huge part of the reason for this was the underperformance of fixed income assets as inflation rose.

It's a lesson Storno has taken to heart, maintaining an allocation to commodities as a hedge against geo-political and inflation risk - a position he acknowledges has hurt a bit recently, but says it has paid off during periods of turbulence and so earned its place in the portfolios. 

Similarly he owns trend-following and momentum strategies, which he says have also performed well in turbulent periods but suffered in more benign years in markets, such as in 2019. 

He tends to own “a bit of everything” as he feels this enables diversification, with some part of the portfolio continuously performing well, and mitigating the potential losses that can be suffered. 

When it comes to dedicated commodity fund exposure, only four of the 50 allocators we monitor hold such a focus, with Gam  at over 5 per cent and the Evelyn Core portfolios at 4.5 per cent.

When it comes to trend following and momentum strategies Simon King, chief investment officer at Vermeer Partners, told Asset Allocator he tends not to invest in such instruments because they are inconsistent, with any gains made promptly wiped out when markets turn.