Fresh into a new year, and it is hard to remember a time when asset allocators were more divided in their views on the 12 months ahead.
Last month, we looked at the big issues affecting portfolios from a top-down perspective, including inflation and the dash from monetary to fiscal policy. This month, we ask how wealth managers are playing risk-on/risk-off moves, including holdings in equities, fixed income, absolute return and cash.
It is the latter where investors differ most, with the likes of Schroders’ Marcus Brookes (see asset allocator, p36-38) holding up to 28% in the firm’s multi-manager Diversity range to “side-step” bond markets.
Mark Smith, a partner at Andrews Gwynn, also favours cash, fearing a “fictional” Chinese growth rate, an Italian banking system on its knees and hyped-up employment figures in the US.
For him, being bullish on equities is “beyond irresponsible” given the backdrop. But this is not a view shared by the hordes of investors who continue to prop up markets, despite the past year of political and economic shocks.
The most recent retail funds data from the Investment Association (IA), covering the month prior to the US election, shows Global Emerging Markets, Global Bonds and Global equity making up three of the top-five selling sectors in October.
However, the latter was the only equity region to experience inflows in October, with net retail sales of £582m.
James Beaumont, head of Natixis Global Asset Management’s portfolio research and consulting group, points to a post-EU referendum move out of mid-cap and UK equities, into large-cap and global funds.
