Is the traditional balanced portfolio looking good right now?

Read more: Typical balanced portfolio ‘a recipe for disaster,’ says Forstrong CEO

“This year has definitely been challenging for both equity and fixed income markets, which is kind of rare,” Sorin Roibu, portfolio manager and senior research analyst at Brandywine Global, told Wealth Professional.

Brandywine Global is one of the investment managers that Franklin Templeton acquired through its Legg Mason acquisition in 2020. Last month, Franklin Templeton Canada launched the Franklin Brandywine Global Sustainable Balanced Fund, which balances an alpha-seeking equity portfolio with a defence-oriented fixed-income ballast, with both sides informed by one macro view.

“Usually, stocks and bonds tend to go in different directions, and act almost as a risk ballast for one another,” Roibu says. “However, very rarely, both asset classes correlate highly.”

Roibu emphasises that the typical balanced portfolio has a dual mandate: it seeks to provide an attractive long-term return while offering effective diversification. That long-term view is useful to keep in mind as periods of simultaneous underperformance in fixed income and equities are very rare, and are usually very short-lived.