Our portfolios had a good month despite weakness in equity and bond markets generally. It was pleasing to see our alternatives and commodities and resources positions contributing positively.
We continue to believe that over the medium-term inflation pressures will remain somewhat elevated, albeit volatile, while real economic growth will remain weak given a relative paucity of productive investment and large debt loads for many economies. Hence, we see the need for precious metals and selective commodities such as energy and resources allocations in portfolios. We will be willing to look at judiciously increasing risk asset exposure on any further meaningful sell-off.We are still very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate. We continue to look to diversify the portfolios where appropriate and sensible.
Our Cash Plus portfolio is defensively positioned, while our Short-Term portfolio is relatively defensive, with both designed to be less volatile over shorter-term time periods than our longer duration portfolios – while being designed for shorter-term liquidity needs.
Our more medium and longer-term orientated portfolios target returns and manage risk with longer-term time periods in mind. The Wealth Builder’s larger risk tolerance gives us the most leeway to back higher risk assets on the basis of our insights and research, while still managing risk prudently over a longer-term time frame. There is scope here to increase equity positioning in the coming months as opportunities present themselves.
Dynamic Asset’s portfolios are designed to be diversified, but focus on investing where return prospects are assessed as capable of meeting the return objectives of the funds over their respective time horizons. This diversification provides useful mitigation against risk over the appropriate time period consistent with each portfolio’s objective, while our active assessment of risk and return can target capital to where it appears most prospectively and appropriately placed. In this way, we believe we are much more forward-looking than most diversified managers, which tend to be much more biased to what has happened (for example, by relying more upon past correlations and volatility - which may be markedly different from the future).
We are better positioned for persistent inflationary pressures than many over the medium term as we hold meaningful weightings to ‘hard assets’ in different guises, and continue to expect these to provide valuable return and risk contributions over time, even if they are occasionally volatile. We believe large and unsustainable debt burdens, demographics, poor government policies and market interference continue to strangle long-term real productivity growth for much of the economy. This potentially bodes relatively poorly for traditional risk assets and index investing, upon which most traditional investment strategies and super funds are heavily dependent.
We are very concerned by geopolitical risks and the massive challenges to the previous period of globalisation and peaceful prosperity. We think investors are best served by thinking outside the box in order to better protect and grow their capital, including potentially greater use of selectively chosen value-adding liquid alternatives, along with precious metals exposures and greater weightings to real asset proxies.
We aim to remain astute and flexible, and highly risk-aware in an ever-changing and potentially highly challenging investment climate. We continue to look to diversify the portfolios where appropriate and sensible.