Supportive monetary policy continues to buoy the outlook for UK, US and Japan equities according to the multi asset team at Baring Asset Management.
Barings notes that, despite recent market volatility, there has been little change in macroeconomic indicators with the broad trend remaining one of gentle improvement in the US, Japan and the UK, while activity in most emerging economies is slowing.
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Percival Stanion, Head of the Global Multi Asset Group at Barings comments: "In this environment, we believe it is still correct to have a bias in favour of risk assets such as equities given that we are in the early stages of recovery where monetary policy is still supportive of growth in most regions. We still like US, Japanese and UK equities and the recent sharp movements in markets has offered the opportunity to selectively add to our holdings in these markets.
"Monetary policy remains hugely supportive in the latter two countries, even if it is less so in the US. UK and Japanese exporters should also continue to benefit from the relative weakness of their respective currencies, while the UK equity market enjoys strong exposure to a resilient US economy."
In terms of other asset classes, Barings recognises that the recent rise in US Treasury yields offers a potential short-term tactical opportunity in fixed income and holdings in this area are likely to increase soon. US government bonds are also viewed as a modest insurance policy on the Federal Reserve being overly optimistic about growth in the US economy.
Elsewhere, Barings has also reallocated to Australian government bonds – using investment grade credit as a source of funds – as its reasserts its hedge against poorer Chinese growth within the portfolio.
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By GlobalDataPercival Stanion concludes "We have nevertheless retained our overall bias to riskier assets. As at the end of June, more than 50% of the Fund was invested in equities, with corporate and convertible bonds collectively accounting for a further 20% of the portfolio."
The Baring Dynamic Asset Allocation Fund has over £7bn in assets under management as at 30 June 2013. The Fund has returned 7.8% in sterling terms on annualised basis over 5 years, out-performing both the FTSE All Share and Libor +4%p.a. which have delivered respective returns of 6.7% and 5.4% over this period.
