Have been underweight the asset classes from the beginning, with concerns over valuations and the long-winded slowdown in China, he is once again taking interest.
Largely, Hambi and his team favour emerging market debt for diversification across SLI’s 25-strong fund-of-funds range, which carries a total £8.9bn in assets under management.
Mostly optimistic on emerging Europe, he said he was impressed with the Invesco Perpetual emerging market equities team and for the higher-risk portfolios he had introduced Schroder Small Cap Discovery, “for a bit of spice”.
He also holds a fettered fund and praised his SLI colleagues running the Global Emerging Markets Equity Income fund, which he said had performed particularly strongly over the past 12 months.
That said, Hambi remains underweight the Pacific Basin, with China’s ongoing economic restructuring, spiralling debt problems and overhanging concerns of a property price bubble.
Further he was worried about Australia, with its dependence on a slowing China and elevated interest rates.
Speaking to Portfolio Adviser, he said: “This has pushed up its dollar strength, which may cause them some problems. The Australians are also facing an asset price bubble as well, so we remain underweight there.
“We are much more comfortable with emerging market debt for diversification, with their yields and several countries’ positions improving. We are particularly optimistic on emerging Europe, which is driving that call.”
Recognising much of MyFolio outperformance has come from growth and small and mid-cap overweights, he is eyeing a switch back into value stocks.
“We are very aware that growth has done very well and value has been left behind, so we are starting to look at contrarian value opportunities.”
With interest rates set to rise in the US – albeit slowly – he said it tends to be a catalyst for value managers to do well.
“At the start of 2016 we bought the Invesco Perpetual European Income fund, which is a high-conviction, contrarian manager with a strong valuation discipline.”
He said the portfolios were currently about 60:40 split growth to value, and while he believes this could reverse as we move forward into the coming year, he said: “We are not quite there yet”.
With concerns over sterling yet positive on the strengthening US dollar, Hambi is favouring US equities – within a broadly neutral equity weighting – and global REITs.
The team is keeping a watchful eye on the possibility of corporate earnings recession and a major inflation jump, which he said would hit bond yields, but said neither of these scenarios was on their expectations radar.
