“Over the longer term, we feel those currencies are likely to weaken further given how much the central banks need to do in order to stimulate their economies,” she says.
China and India redirected
In terms of emerging markets, Sarasin used to keep a standalone position on China which it sold off. But the asset manager also kept one in India until recently, which it has now sold.
“On valuation grounds, it was right to reduce direct India exposure. Even if Modi has achieved a few good things, it is a difficult road ahead and valuations did not reflect that. So we sold off our position there in January and it has in fact underperformed since then.”
Walker points to Brazil as seeing some strong developments in clearing government corruption within the ruling party at the moment. Coronation Global Emerging Markets is the fund Sarasin uses for emerging markets, and the firm has a reasonable allocation there. But the policy team would also be happy to invest on a standalone basis in Brazil, if fundamentals continue to improve.
Sarasin & Partners’ largest equity position from a fund of funds perspective is in Vulcan Value Equity, and it has increased its position there steadily since last year. The fund lost 10% against the S&P 500 last year due to the lack of exposure to resurgent value stocks, but this year it has climbed relative to the index. Other funds include Hermes Global High Yield and Schroder Recovery.
“We’ve been following the Schroders fund for many years, because its short-term performance had been awful while long-term performance was fantastic,” says Walker.
“It has had an amazing start to the year and that’s an indication of the shift in focus from growth to value. We think that’s a really interesting one.”
