Text size

Multi-asset investing: Despite trade risks, growth assets have room to run

Listen to article

This is a sponsored article from PineBridge Investments.*

Amid rising economic and political uncertainty, it’s natural to think the prospects for risk-taking are dimming. As PineBridge’s portfolio manager for global multi-asset Sunny Ng explains, political factors are obscuring positive forces in the market.

An array of cross-currents confronts global markets, but they appear positive on balance. Trade tensions have weakened confidence in pockets of Asia and Europe, yet not in the US. China, in a reversal of its deleveraging stance, now supports tariffs, currency weakness, and monetary and fiscal thrusts. Domestic growth has become a priority to build a buffer against trade, yet re-leveraging China is risky and cannot go on for long given the high degree of existing leverage. While trade-related risks have risen, valuations have reset and financial conditions remain accommodative.

We remain constructive on global markets, with a generally bullish stance over the intermediate term, we believe the pace of today’s earnings growth, accompanied by mild inflation, points to mid-cycle dynamics; and we expect a re-acceleration of growth, with the next leg up characterised by productivity. After a slowdown in growth — largely due to the lack of business investment — companies are now stepping up investment spending. Having seen peers and other businesses being disrupted, today’s business investment is aimed at incorporating disruptive technologies. This investment will drive higher productivity and better profitability, which will extend the cycle beyond what most are expecting. Second quarter earnings continue to confirm broad global momentum, with exceptional US strength and weaker — yet still healthy — earnings growth outside the US. With all of this in mind, we expect corporate cash flows to grow into and beyond today’s prices.

What it all means for asset allocation
Multi-asset strategies help investors navigate market dislocations by allowing them to dynamically shift allocations across asset classes as market conditions change. In this tug of war between potential downsides and upsides, we believe investors need to adopt an intermediate-term view on how the landscape is likely to change and position their asset allocations to maximise opportunities and reduce risk. Here is ours:

  • Lower prices and robust fundamentals make growth assets more attractive.
  • Developed market bonds remain unattractive, particularly in the eurozone.
  • EM debt has become relatively more attractive, but only due to a few outliers.
  • Commodity-related assets are attractively valued with supportive supply/demand dynamics.
  • Private assets require selectivity and future-proofing.

Overall, we believe there’s room to run — economic fundamentals continue to indicate we are closer to the middle of the cycle than the end, and valuations are reasonable relative to anticipated earnings growth.

For more on our global dynamic asset allocation, visit pinebridge.com.*

*In Hong Kong, the website www.pinebridge.com has not been reviewed by the Securities and Futures Commission (“SFC”) and may contain information of funds not authorised by the SFC. In Singapore, the website www.pinebridge.com (including any contents therein) have not been reviewed or endorsed by the MAS.

Potential investors should consider the following key risks before investing in any of the Strategies mentioned:

Market Volatility Risk: All types of investments and all markets are subject to market volatility based on prevailing economic conditions. Price trends are determined mainly by financial market trends and by the economic development of the issuers, who are themselves affected by the overall situation of the global economy and by the economic and political conditions prevailing in each country. As securities may fluctuate in price, the value of your investment may go up and down.

Investment Loss Risk: Investments may decline in value and investors should be prepared to sustain a total loss of their investment.

FDI Risk: The prices of FDI can be highly volatile. In addition, the use of FDI also involves certain special risks depending on the type of FDI, including but not limited to correlation risk, counterparty credit risk, legal risk, settlement risk, margin risk, as well as other possible risks that may arise.

Equity Risk: The value of shares and securities related to shares may fall due to issuer related issues, financial market dynamics and world events including economic and political changes.

Country Concentration Risk: A concentrated investment strategy in equity and equity-related securities of companies related to the economic development and growth of India may be subject to a greater degree of volatility and risk than a portfolio which is diversified across different geographic regions.

Emerging Market Risk: Emerging markets are typically smaller, less transparent and subject to evolving, less stable political and regulatory regimes.

All investments are subject to regional, industry, market, political, regulatory, competitive, business, financial, and other risks. The risk factors described should not be considered an exhaustive list of risks, which potential investors should consider before investing in the strategy. All investment decisions should be made based on an independent evaluation in consultation with financial and legal advisors.

The source of the information in this document is from Global Multi-Asset team of PineBridge Investments unless otherwise specified.

Global Disclosure Statement
PineBridge Investments is a group of international companies that provides investment advice and markets asset management products and services to clients around the world. PineBridge Investments is a registered trademark proprietary to PineBridge Investments IP Holding Company Limited.

For purposes of complying with the Global Investment Performance Standards (GIPS®), the firm is defined as PineBridge Investments Global. Under the firm definition for the purposes of GIPS, PineBridge Investments Global excludes some alternative asset groups and regional legal entities that may be represented in this presentation, such as the assets of PineBridge Investments.

Readership: This document is intended solely for the addressee(s) and may not be redistributed without the prior permission of PineBridge Investments. Its content may be confidential, proprietary, and/or trade secret information. PineBridge Investments and its subsidiaries are not responsible for any unlawful distribution of this document to any third parties, in whole or in part.

Opinions: Any opinions expressed in this document represent the views of the manager, are valid only as of 10 August 2018, and are subject to change without notice. There can be no guarantee that any of the opinions expressed in this document or any underlying position will be maintained at the time of this presentation or thereafter. We are not soliciting or recommending any action based on this material.

Risk Warning: All investments involve risk, including possible loss of principal. Past performance is not indicative of future results. If applicable, the offering document should be read for further details including the risk factors. Our investment management services relate to a variety of investments, each of which can fluctuate in value. The investment risks vary between different types of instruments. For example, for investments involving exposure to a currency other than that in which the portfolio is denominated, changes in the rate of exchange may cause the value of investments, and consequently the value of the portfolio, to go up or down. In the case of a higher volatility portfolio, the loss on realization or cancellation may be very high (including total loss of investment), as the value of such an investment may fall suddenly and substantially. In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved.

Performance Notes: Past performance is not indicative of future results. There can be no assurance that any investment objective will be met. PineBridge Investments often uses benchmarks for the purpose of comparison of results. Benchmarks are used for illustrative purposes only, and any such references should not be understood to mean there would necessarily be a correlation between investment returns of any investment and any benchmark. Any referenced benchmark does not reflect fees and expenses associated with the active management of an investment. PineBridge Investments may, from time to time, show the efficacy of its strategies or communicate general industry views via modeling. Such methods are intended to show only an expected range of possible investment outcomes, and should not be viewed as a guide to future performance. There is no assurance that any returns can be achieved, that the strategy will be successful or profitable for any investor, or that any industry views will come to pass. Actual investors may experience different results.

Information is unaudited unless otherwise indicated, and any information from third-party sources is believed to be reliable, but PineBridge Investments cannot guarantee its accuracy or completeness.

PineBridge Investments Europe Limited is authorised and regulated by the Financial Conduct Authority (FCA). In the UK this communication is a financial promotion solely intended for professional clients as defined in the FCA Handbook and has been approved by PineBridge Investments Europe Limited. Should you like to request a different classification, please contact your PineBridge representative.

Approved by PineBridge Investments Ireland Limited. This entity is authorised and regulated by the Central Bank of Ireland.

In Australia, PineBridge Investments LLC is exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 (Cth) in respect of the financial services it provides to wholesale clients, and is not licensed to provide financial services to individual investors or retail clients. Nothing herein constitutes an offer or solicitation to anyone in or outside Australia where such offer or solicitation is not authorised or to whom it is unlawful. This information is not directed to any person to whom its publication or availability is restricted.

In Hong Kong, the issuer of this document is PineBridge Investments Asia Limited, licensed and regulated by the Securities and Futures Commission (SFC). This document has not been reviewed by the SFC.

In Dubai, PineBridge Investments Europe Limited is regulated by the Dubai Financial Services Authority as a Representative Office.

PineBridge Investments Singapore Limited (Company Reg. No. 199602054E) is licensed and regulated by the Monetary Authority of Singapore (MAS). In Singapore, this material may not be suitable to a retail investor and is not reviewed or endorsed by the MAS.

This is a sponsored article from PineBridge Investments.*

Related Tags