“The problem with making asset allocations at the moment is playing the yuan devaluation, which is difficult to do directly,” he said. “But on the flip side you can do it through sovereign bonds, and we would do it through it passives.
“We are currently broadly underweight corporate and sovereign bonds and underweight duration, which we have achieved through two trackers – the L&G All Stocks Gilt Index and the SPDR Barclays 1-5 Year Gilt UCITS ETF. By combining those two funds we are looking to control duration; the L&G vehicle is a low-cost full-fat full-duration option, and we use the SPDR 1-5 Year Gilt fund to bring down our duration to around five years.”
Furthermore, pending the upcoming FOMC meeting and subsequent economic data, Seager-Scott also has a view to buying US Treasuries.
“Depending on what happens in the US, we might look at Treasuries as well, which we would access through the SPDR Barclays US Treasury Bond UCITS ETF,” he explained.
“There are a lot of uncertainties, but the good thing about sovereign bonds is that there are not a lot of active managers that can add value after fees, so it is ripe for using passive instruments.”
