Diversification? Now there’s an idea …
I remain positive for this year, expecting the IM Thoroughbred Core Alpha medium risk, longer-term portfolio to return in excess of inflation which, in the UK, I expect to be less of an issue than commentators would currently still have us believe. Certainly the small move down recently looks as if it can be repeated, if not every month then several more times this year. Protecting against inflation, therefore, isn’t high on my list.
No interest
I said in February that I remain convinced that no conditions will apply requiring much, if any, change to interest rates – we are now well over two years on from a 0.5% base rate, and my portfolio reflects the lack of interest in both senses of the word that I get from cash.
However, I have built cash up over the past couple of months as a security, rather than for positive returns. I don’t expect to hold it for long.
I still like Japanese equities and also believe that over the year my European weightings will play well – there remains a clear break between sovereign debt issues and corporate Europe – the latter looking in great shape. I remain happy to hold smaller companies in the UK, Europe and the US.
I still have 5% in gold (more security) but also because I think I can make some money even if markets are positive elsewhere.
BRIC swap
As regards fixed income assets, I remain happy to hold corporates but am steering well clear of those funds that are gilt or quasi-gilt funds. High yield has been good to me but the returns from my zero holding also look to be holding up.
In emerging economies I have sold all my India holdings and topped up my broader emerging market and more targeted Brazil holdings. It is noticeable how BRIC economies, so buoyant still, have not seen investment returns translate this year. Indeed, last month all four major indices fell against a broader global rise for equities.
UK and overseas commercial property still account for around 7%, with overseas property being exposure to Asia.
Perhaps more than in recent times, a diversified portfolio – which we were told broke irrevocably as an idea in late 2008 – makes sense after all.
