9 December 2016

Asset allocation: A snapshot



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.

 

Fixed Income

UK Government Bonds

 

We see the re-emergence of inflation as a topic in the US and think that the same drivers will arise here. We prefer shorter dated index linked for the time being.

UK Corporate Bonds

 

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

UK Indexed Linked Bonds

 

As with Gilts, we prefer shorter dated index linked bonds. GBP weakness will only work to boost inflation.

UK Equities

UK Financials

 

The sector could benefit in the short term from the strength of the UK economy.

 

Consumer goods

 

We like this sector for its defensive qualities, but are cautious on valuation of overseas earners.

Oil & Gas

 

Given the unfavourable supply/demand dynamics we do not expect any improvement until we see concrete production cuts announced. We do think we have seen the bottom in oil prices.

Consumer Services

 

Some interesting opportunities in Media and Leisure exist; we are still positive on consumer spending.

Industrials

 

Recent strength in the sector could be an opportunity to boost core holdings.

 

Other Equities

US

 

We are now positive on North America thanks to the reflationary political situation and an improved earnings outlook.

Europe

 

Upcoming political events and the potential for sterling strength lead us to be cautious here, with the banking sector concerns likely to overshadow the markets.

Japan

 

We have little conviction as to Japan’s economic outlook and subsequent policy response.

Asia/China

 

There are signs of the economies stabilising but we remain cautious on a potential US rate rise and its effects.

Emerging Markets

 

Generally positive on emerging markets but some caution required due to recent strength, coupled with a potential US rate rise.

Alternatives

Property

 

The preference is property companies to open-ended funds, but caution on liquidity.

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

 

As with absolute return, investors should be cautious when looking for yield and pay close scrutiny to the quality of the investment product.

 


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