BNY Mellon identifies strong diversifiers
Renewable energy, Indian equities and some emerging market debt have been highlighted as the most effective portfolio diversifiers in the next 12 months by a major investment house.
BNY Mellon Investment Management cited the three asset classes as potentially key for investors’ portfolios in its inaugural ‘Multi-Asset Special Report’ publication.
The group said it had drawn upon the expertise from its affiliated specialist investment boutiques to help establish which asset classes should be seriously considered by investors, given the macroeconomic backdrop of a slowing China and ongoing Greek crisis.
Paul Flood, lead manager of the Newton Multi-Asset Income fund, thought renewable energy would be a sensible investment.
“Owing to their strong cashflow generation, high payout ratios and high government subsidy support, we think renewable energy assets will be the most effective in smoothing returns in the next 12 months,” he said.
“To us, the combination of these three factors means you have very favourable stable cashflows with a high degree of certainty around them.”
Standish co-deputy chief investment officer Raman Srivastava said many areas of the fixed income market were “fair to expensively valued” at present.
“We do, however, find value in local emerging bond markets in Latin America, such as Brazil and Mexico,” he said.
“In developed markets, we find the government debt of Australia attractive compared with the US or Germany.”
Mellon Capital global investment strategist Jason Lejonvarn said looking across equity markets, Europe was likely to be the most attractive investment.
“We have lowered our long positions in US equities and invested more into what we would call core European equities, where we still see some substantial value and opportunities between now and the end of the year,” he said.
Mr Flood was also bullish on Indian equities if the country continued its “structural reform led by a pro-business national government with prime minister Narendra Modi at its head”.
“One significant challenge may come from the fact 2015 is an El Niño year, which could result in major climate events, including significant droughts leading to high inflation in commodity prices,” he added.
“However, in the longer term the country has favourable population dynamics and a strong government reform agenda.”
