COVID-19 prompts multi-asset shift

covid-19/coronavirus/First-Sentier-Investors/FSI/Kej-Somaia/multi-asset/

21 May 2020
| By Chris Dastoor |
image
image
expand image

As the COVID-19 pandemic crushes the equity market, an increase to credit and developed market bonds are the key changes First Sentier Investors’ have made to its multi-asset portfolio.

Its six-monthly Neutral Asset Allocation Review in April, 2020, said the weight of equities had now moved from 50% to 29%, which was comprised of 19% global and 10% Australian equities.

Government bonds were increased from 21% to 33%, while global bonds went from no allocation to 7% and high-yield credit from zero to 5%

The review noted a key difference between this compared to other downturns in the last 100 years, which was the unprecedented fiscal and monetary stimulus.

Kej Somaia, co-head of multi-asset solutions, said in December the question would be “how long would the bull run last and now it was how long would the recovery take?”.

“We like investment grade and high-yield credit at the moment, as we believe it delivers a lower risk portfolio at the aggregate level, especially with strong central bank support,” Somaia said.

“The US Federal Reserve and the European Central Bank have indicated that they will not only be purchasing government bonds and investment grade credit, but for the first time, quality high-yield bonds too.

“This is a game-changer for fixed income, particularly in a portfolio context when we are reducing risk to higher volatility equity allocations.”

Somaia said relying solely on the review was not sufficient to manage the current market conditions to meet return objectives.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

2 months ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

2 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

4 months ago

Entireti has unveiled the new name for the AMP financial advice businesses that it acquired last year....

4 weeks 1 day ago

A Sydney financial adviser has been permanently banned from providing any financial services, with the regulator deriding his “lack of integrity, trustworthiness and prof...

3 weeks ago

Minister for Financial Services, Stephen Jones, has provided further information about the second tranche of the Delivering Better Financial Outcomes (DBFO) reforms....

1 week 6 days ago

TOP PERFORMING FUNDS