Asset Allocation in focus

Asset Allocation in focus

Research

As part of our focus on providing a high quality, personalised investment service, we look to support our investment managers in their decision making when it comes to constructing client portfolios. Our asset allocation committee is one example of this, via their monthly output.

The Asset Allocation Committee, which consists of three members of our research team and a number of investment managers, aims to provide a view on the asset allocation that seems most suitable in current macro conditions. The output of the monthly meetings remains a suggested stance and it is important to note, that the views expressed are not those of the firm but rather those of the committee and that the views expressed may not necessarily be those of your individual investment manager.

Here we present a snapshot of the current views.

 

Fixed Income

UK Government Bonds - Conventional gilts

 

Inflation as a threat has re-emerged whilst expectations for rate rises are moderating. 

UK Corporate Bonds

 

Investment grade bonds with the shortest maturities are preferred, within the constraints of income requirements.

UK Government Bonds - Index linked gilts

 

The re-emergence of inflation is supportive but beware higher coupon issues. 


UK Equities
 

Materials

 

Supply and demand dynamics are improving within a favourable macroeconomic environment.

 

Consumer Staples 

 

We like the sector for its defensive qualities and recent weakness offers some buying opportunities.

Consumer Discretionary

 

The market has been polarised by disruptive technology so stock selection is critical. 

Financials – ex Banks, Insurance & Property

 

This is a mixed bag of a sector. Caution to be taken on asset managers which are often a geared play on the underlying assets.

Financials – Banks 

 

The sector should benefit from rising interest rates.

 

Financials – Life Insurance

 

Supportive demographics could provide opportunities here.

Real Estate

 

Some discounts in the UK are at historically wide levels. Be wary of effect of rising interest rates on asset values. 

Health Care 

 

Benefits from the tailwind of global demographics and the sector’s defensive qualities, however, it is important to distinguish between pharmaceuticals, healthcare and biotechnology.

Industrials

 

Some excellent opportunities in the UK at this favourable time in the cycle. 

Energy

 

Supply and demand balanced by current geopolitical outlook.

Information technology 

 

Prefer funds and international blue chips for exposure to specific tech themes. The long term attractions of the sector are clear.

Telecommunications

 

Sector looks attractive on yield and valuation grounds, whilst capital expenditure and competition remain an issue.

Utilities

 

We don’t like this sector for its high gearing and exposure to political risks.

Alternatives

Absolute Return

 

Exposure might be appropriate given current market conditions. We suggest caution on the “yield hunt” and are wary of lower quality products.

Infrastructure

 

Investors should be cautious when looking for yield and pay close scrutiny to the quality of the investment product and premiums to NAV. 

 

Next article

JM Finn News

Previous article

GVC Holdings

Sign up to receive Prospects direct to your inbox.