For high-risk portfolios, the obvious first port of call is equities, which make up more than two-thirds of assets. Private client investors say they are increasingly looking to allocate to the perceived riskier end of this asset class.
In particular, there has been a renewed appetite for Asia and emerging markets.
“In our higher-risk portfolios investors will have a significant amount of their money, first in equities, and second in Asia and emerging markets. For both of those asset classes we are now targeting overweight portfolios,” says John Husselbee, head of multi-asset at Liontrust.
“Against their own history, and against other asset classes on the global stage, they look cheap. We are taking a fairly low beta play to Asia, through Stewart Investors Asia Pacific Leaders and the Schroder ISF Asian Total Return Fund run by Robin Parbrook.”
For Husselbee, the way to make money in Asia in recent years has been to consider the downside before trying to make money on the upside, and this will continue to be the case in volatile markets. “We have global growth, but it is modest and fragile, so you still need the type of fund that can protect capital as well as make it,” he says.
James Mahon, chief investment officer at Church House Investment Management, says he too has “started to nibble” at Asia, through trading companies Jardine Matheson and Jardine Strategic. “We are interested in consumer staples and consumer discretionary rather than resources, where there are governance and legal issues to contend with,” he says.
Church House’s largest exposure, however, remains the US – despite concerns about the dollar – while it has also been adding to undervalued Europe in high-risk mandates.
Seven Investment Management’s senior portfolio manager Peter Sleep also picks out Europe and Asian emerging markets as points of interest. He says: “We like Europe because it is cheap and seems to be doing quite well with GDP growth picking up, and Asian markets we hope will pick up as well.
“The net beneficiaries of the fall in oil price will be consumers, both in Europe and in Asia.”