Tactical change - 18 June 2015

24 June 2015
Trevor Greetham, Head of Multi Asset at Royal London Asset Management (RLAM), has made a tactical change to asset allocation of the Governed Portfolios and Governed Retirement Income Portfolios (GRIPs).

What's changing?

Trevor has increased our overweight in equities relative to corporate bonds and index-linked gilts, taking advantage of market weakness surrounding Greece's creditor negotiations.

The Governed Portfolios and GRIPs have been overweight in equities for the last few years. Investor sentiment is depressed but with the world economy strong, inflation low and central bank policy loose, we continue to see upside potential for equity markets.

Within equities we are overweight in Japan and Europe, the two parts of the world in which central bank policy is particularly loose and where growth has been picking up.

We are neutral in the US but underweight in the Emerging Markets, Asia Pacific and UK. In part this reflects our concerns that a resumption of US dollar strength as the Federal Reserve starts raising rates will put downward pressure on commodity prices and stock markets with heavy resource sector exposure.

We are underweight in corporate bonds and index-linked gilts in order to fund the equity overweight and also as we see upside potential to yields. We expect inflation pressures to build later in the year, forcing central banks to reduce monetary accommodation.

We have moved property up to neutral on the basis of a positive market outlook. We expect UK residential and commercial real estate to see further strength even if the Bank of England follows the Fed and begins to raise the Base Rate.

Latest tactical positions

 Overweight NeutralUnderweight
Equities      
Corporate Bonds    
Index Linked    
Property    
High Yield    

Direction of arrows show change from previous tactical change.

There are no changes to Governed Portfolio 7 as a result of this latest change as this portfolio currently has no exposure to fixed interest.

In the GRIPs, high yield is a strategic holding in the portfolios so this change sees us move overweight from a previous underweight allocation.

Further information

RLAM are one of the UK’s leading fund management companies managing around £82 billion of assets1 and investing across all major asset classes.

Notes

1As at 31/12/2014

Last updated: 20 Nov 2015

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