Asset Allocation in focus

Asset Allocation Focus

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 showcasing their views on a global sectorial basis.

The asset allocation committee, which consists of the 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/demand dynamics improving macro data favourable.

 

Consumer Staples 

 

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

Consumer Discretionary

 

Incumbents continue to be challenged by disruptive technology and changing consumer behaviour. Selective opportunities are on offer however

Financials – ex Banks, Insurance & Property

 

Heterogenous sector. Asset managers often geared plays on underlying assets.

Financials – Banks 

 

Prefer globally exposed banks to domestic, look for beneficiaries of rising 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. Global real estate may offer better value but again caution on bon

Health Care 

 

Growth and defensive attributes and global demographic tailwind. Distinguish between pharma/healthcare/biotech sub sectors.

Industrials

 

Wage inflation should drive a capex cycle. Some excellent opportunities in the UK.

Energy

 

Inventories should fall in the USA helping underpin prices. Dividends looking more secure with oil at $65-$75.

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

 

Bond proxy. Political risk. High gearing.

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. 

 

             
                                                          

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