Rathbones LED portfolio approach

A recent news article discussed a new approach used by Rathbones, the wealth manager, for developing portfolios. It is called LED, see Elizabeth Savage's work. It divides the world into three major buckets, liquid assets, equity-like assets, and diversifiers.  The liquidity bucket will be for cash low duration instruments, and low volatility assets. The equity-like assets will be those that have market sensitive returns and correlated to "bad times". The diversifiers provide uncorrelated returns like global macro, managed futures, commodities, or any asset that does well in "bad times" and is unrelated to stock returns

I think this is a simple innovative way of thinking about portfolio structure. I am not completely sold on the operational construct, but it may be a good simple way to think about core principles needed for any portfolio. You need liquidity. You need returns. and you need diversifiers to generate the only free in finance. The diversifiers allow you to hold risky assets that will turn down when the economy turns down. 

Simply put, do you have liquidity for cash needs? How much of your portfolio is locked up? Do you have the right amount of equity-like returns to hit a performance target? And, do you have diversifiers for protection? The real free lunch comes when you have assets that have all three characteristics, liquidity, diversification, and and high returns. LED is a good way to look at a portfolio structure from a different perspective.