SLI mulling shift from US equities to EM

Standard Life Investments next shift in its tactical asset allocation is likely to be a cut in its US equities weighting in favour of an increase in its emerging markets allocation

SLI mulling shift from US equities to EM

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“We remain overweight in US equities but valuations are looking toppy and earnings need to catch up with ratings,” Hambi said. “We think there is some more earnings growth to come there but the US does not look cheap anymore,” he added.

At present US equities is SLI’s second biggest overweight allocation, marginally behind UK property.

With increasing signs of a recovery in emerging markets it makes sense to raise allocations at the expense of US rather than UK equities Hambi explained. “We see the UK as a bit cheaper than the US and we remain comfortable with the economic outlook for the country and our weighting,” he said. “Interest rates may well go up in the UK but not by much as there is little pressure from inflation,” he added.

The US is also a better candidate for a reduction in weighting than Japan in Hambi’s view. “We think Japan has been oversold as the numbers coming out of the country have not been as bad as many people expected,” he said.

SLI reviews its asset allocation quarterly and the last change was in November 2013. It determines the allocation in consultation with Barrie & Hibbert.

The MyFolio multi asset allocation includes 14 asset classes and is overweight on US equities, UK equities, UK property, hedged high-yield, sterling corporate and Japanese equities.  The allocation is underweight on cash, UK Gilts, Asia Pacific equities, and emerging markets while it is neutral on European equities.

Hambi is particularly bullish on UK commercial property as he sees the continued improvement in the UK growth environment supporting both valuations and yields, relative to other asset classes.

The last asset class to be introduced to the range was absolute return bonds in 2012. Hambi said there are no plans to introduce any more new asset classes but his team keeps an open mind on the matter.

The MyFolio range overseen by Hambi offers investors the choice of 25 portfolios across five different risk options. He heads a team of nine investment professionals managing £4 billion in assets. 

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