Barings multi-asset team adds risk for first time in a year

The team has been boosting its equity weightings across the board and cutting government bonds, which are traditionally seen as a more defensive investment, and cash.

Within equities the team is buying more cyclical areas such as emerging market companies, as well as companies in the energy, financials, industrials. It is cutting more defensive areas such as telecommunications companies and consumer staples.

In bonds the team is boosting its focus on emerging markets and cutting Australian bonds, which have been viewed as another ‘safe haven’.

“The recent changes to our portfolios are significant as this is the first time we have been ‘risk on’ for more than a year,” said Percival Stanion, head of asset allocation at Barings.

“This is a tactical move that may last only a matter of months, but we expect to see a sharp upward move in markets over this timeframe.

“The compelling argument comes from the deep pessimism now pervading the market place, huge piles of cash and low yielding government bonds and bills in investor accounts, and the very cheap rating of equities, particularly in the US.”

Mr Stanion added that the team continued to believe that the underlying global economic situation was poor.

“A European recession is well underway due to austerity measures in the south and we see no early end to this,” he said. “The main policy response is likely to rest with the European Central Bank (ECB).”