In this Observations piece, we explain the process for developing an investment strategy for a millennial investor. We outline the key factors we consider at each stage of the portfolio construction process – including understanding the millennial investor’s objectives, developing an appropriate asset allocation, selecting instruments, and managing risk.

  • For the typical millennial investor, investing tends to be more than just about achieving a financial outcome. The typical millennial is also driven to invest in causes aligned to their values, beliefs and priorities, as well as themes they have an interest in.
  • Investment strategies have been fairly rigid in the past and this has meant limited flexibility for millennials who wish to adopt a differentiated investment approach. A critical point is that millennials tend to have a longer-term investment horizon, an element that allows for flexibility with their investments.
  • Our portfolio construction process begins with asset allocation then drills down to instrument selection. Our in-house millennial illustrative portfolio has a combination of funds, direct instruments, active/passive management, exchange-traded funds (ETFs) and exposure to various themes. The portfolio also utilises our in-house direct equities millennial list. This equity list provides investible ideas exposed to many of the themes that millennials have shown an interest in.  
  • A number of the themes millennials focus on tend to be correlated in an investment sense and some can be prone to investment ‘bubbles’. We look to mitigate risk by building a diversified portfolio that limits reliance on a particular outcome to deliver results. The first layer of defence is asset allocation, and with regards to underlying investments, we size them proportionately to expected risk.