The answer, according to Peter Bourne, managing director at Jersey-based Ashburton, is to take a multi-asset, global, well-diversified investment approach.
Despite the relatively good start to the year during its first quarter, Bourne is still mindful that the same thing happened last year only for markets to fall dramatically as the year progressed, with investors losing any early gains.
Investors, he says, are still positive: “While we know that markets do everything else but move in a straight line, there certainly seems to be more room for optimism than more of the same gloomy scenarios we have grown used to over the past couple of years.”
The problem for investors comes with how they translate their optimism into making an asset allocation decision given the breadth of investment universe he is advocating.
Bourne adds: “What is perhaps not so clear for investors is in what geographies, which asset classes and where on the risk curve they should be investing: is it in the safer, developed markets like the US stock market, which has had a stellar performance recently, or in emerging markets, where lower and volatile returns can often belie the perceived risk-reward payoff?
Multi-asset, multi-name
“Globally, multi asset sectors, under a variety of names such as managed, balanced and target return funds, continue to attract sizeable investment flows. Other than the complexity of the global asset allocation decision itself, ageing Western demographics have led a shift towards outcome-based investment, while a lack of yield and increased risk awareness among individuals and advisers have also built strong appetite for this product suite.”
Tristan Hanson, head of asset allocation at Ashburton, advocates perhaps a more traditional approach, describing valuations as supportive of equities, corporate and selective emerging market bonds outperforming cash or developed market government bonds.
“While we acknowledge the risks out there and expect economic conditions to remain challenging for some time to come in much of the world, especially the G7, we expect further gradual upside for equities over the coming two to three years, even if it is a choppy ride at times,” he says.
