MEDIA RELEASE: Investors need an enhanced toolkit to fight low rates, low growth – Investec Asset Management
Announcement posted by Investec 23 Jun 2015
Media Release
23 June 2015
Investors need an enhanced toolkit to fight low rates, low growth – Investec Asset Management
Australian investors must broaden their opportunity set to face the dual challenges of low global interest rates and historically low economic growth, according to Investec Asset Management.
Speaking at a media briefing in Sydney today, Michael Spinks, Portfolio Manager for Investec’s Diversified Growth strategy, said the combination of six years of rising global equity prices, persistent low economic growth and unprecedented quantitative easing by key central banks, was creating a unique set of circumstances that made it increasingly difficult for investors to find value.
“In this environment, investors need to be aware that the old rules of diversification do not necessarily apply,” said Mr Spinks. “Financial markets are an increasingly multi-dimensional world, so investors need to closely examine their portfolio allocations and look at the underlying drivers of asset returns to determine if they are truly diversified.”
Mr Spinks said it was important for investors to focus on asset class behaviours, not labels. For instance, while bonds as an asset class are generally thought to behave differently to equities, certain types of bonds are in fact highly correlated to the global equity market.
“Asset class relationships can also vary significantly over time,” he said. “For instance, while property as an asset class has been highly correlated to equities performance since the Global Financial Crisis, prior to this it actually had a very low correlation to equities markets.”
In line with this thinking, the strategy of Investec Asset Management’s recently launched Diversified Growth Fund (Australian) was to group assets into three distinct behaviour categories – Growth, Defensive and Uncorrelated.
“Growth assets - such as equities, high yield bonds, emerging market debt and property - tend to have returns directly related to expectations of real economic growth,” said Mr Spinks.
“Defensive assets - such as developed market government bonds, index-linked bonds and hedging strategies like put options – should react positively to declining expectations of economic growth. Finally, uncorrelated assets such as gold and infrastructure, perform in a way that is generally unrelated to growth.”
Given the strong support for global growth in the coming months from weaker oil prices which are expected to remain so, Mr Spinks said he believed there was particular value to be found in growth assets at present.
“Global equity valuations are looking reasonable historically on a price to earnings basis, but there is some divergence in terms of the value different markets present,” he said. “We favour Japanese equities in particular, where strong earnings growth has been boosted by corporate tax cuts, and large-cap US tech companies, as we believe they have a proven ability to maintain growth rates, as well as realistic earnings expectations and strong cash flow generation.”
Mr Spinks said he believed a multi-asset approach was particularly important for investors looking to manage risk as well as return. “Multi-asset strategies – those that utilise a truly diversified approach – may provide efficient integration of the key components needed to reduce return variability, as well as providing the potential for a strong level of returns.”
ENDS
Notes to Editors
About Investec Asset Management
Investec Asset Management is a specialist investment manager, providing a premier range of products to institutional and individual investors. Employees are equity stakeholders in the firm. Established in 1991, the firm has been built from start-up into an international business managing approximately US$115bn* on behalf of third party clients. We have grown from domestic roots in Southern Africa and the UK to a position where we proudly serve a growing international client base from the Americas, Europe, Asia, Australia, the Middle East and Africa. We employ over 170 investment professionals. The firm seeks to create a profitable partnership between clients, shareholders and employees, and to exceed clients' performance and service expectations. Investec Asset Management is a significant component and independently managed entity within the Investec Group, which is listed in London and Johannesburg.
*as at end March 2015
For further information, please contact:
Sarah Kendell +61 2 8248 3741
Honner Media
sarah@honnermedia.com.au
Vian Sharif +44 207 597 1834
vian.sharif@investecmail.com
Emma Margetts +44 207 597 1844
emma.margetts@investecmail.com
The information contained in this press release is intended primarily for journalists and should not be relied upon by private investors or any other persons to make financial decisions. Furthermore, the material contained herein is for informational purposes only and should not be construed as an offer, or solicitation of an offer, to buy or sell securities either generally or in any jurisdiction where the offer or sale is not permitted. Offers are made only by prospectus or other offering materials and upon an investor meeting certain suitability standards and any other applicable requirements as required by law. All of the views expressed about the markets, securities or companies in this press comment accurately reflect the personal views of the individual fund manager (or team) named. While opinions stated are honestly held, they are not guarantees and should not be relied on. Investec Asset Management in the normal course of its activities as an international investment manager may already hold or intend to purchase or sell the stocks mentioned on behalf of its clients. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This press release contains statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Actual results may differ materially from those stated herein. Telephone calls may be recorded for training and quality assurance purposes.
www.investecassetmanagement.com
23 June 2015
Investors need an enhanced toolkit to fight low rates, low growth – Investec Asset Management
Australian investors must broaden their opportunity set to face the dual challenges of low global interest rates and historically low economic growth, according to Investec Asset Management.
Speaking at a media briefing in Sydney today, Michael Spinks, Portfolio Manager for Investec’s Diversified Growth strategy, said the combination of six years of rising global equity prices, persistent low economic growth and unprecedented quantitative easing by key central banks, was creating a unique set of circumstances that made it increasingly difficult for investors to find value.
“In this environment, investors need to be aware that the old rules of diversification do not necessarily apply,” said Mr Spinks. “Financial markets are an increasingly multi-dimensional world, so investors need to closely examine their portfolio allocations and look at the underlying drivers of asset returns to determine if they are truly diversified.”
Mr Spinks said it was important for investors to focus on asset class behaviours, not labels. For instance, while bonds as an asset class are generally thought to behave differently to equities, certain types of bonds are in fact highly correlated to the global equity market.
“Asset class relationships can also vary significantly over time,” he said. “For instance, while property as an asset class has been highly correlated to equities performance since the Global Financial Crisis, prior to this it actually had a very low correlation to equities markets.”
In line with this thinking, the strategy of Investec Asset Management’s recently launched Diversified Growth Fund (Australian) was to group assets into three distinct behaviour categories – Growth, Defensive and Uncorrelated.
“Growth assets - such as equities, high yield bonds, emerging market debt and property - tend to have returns directly related to expectations of real economic growth,” said Mr Spinks.
“Defensive assets - such as developed market government bonds, index-linked bonds and hedging strategies like put options – should react positively to declining expectations of economic growth. Finally, uncorrelated assets such as gold and infrastructure, perform in a way that is generally unrelated to growth.”
Given the strong support for global growth in the coming months from weaker oil prices which are expected to remain so, Mr Spinks said he believed there was particular value to be found in growth assets at present.
“Global equity valuations are looking reasonable historically on a price to earnings basis, but there is some divergence in terms of the value different markets present,” he said. “We favour Japanese equities in particular, where strong earnings growth has been boosted by corporate tax cuts, and large-cap US tech companies, as we believe they have a proven ability to maintain growth rates, as well as realistic earnings expectations and strong cash flow generation.”
Mr Spinks said he believed a multi-asset approach was particularly important for investors looking to manage risk as well as return. “Multi-asset strategies – those that utilise a truly diversified approach – may provide efficient integration of the key components needed to reduce return variability, as well as providing the potential for a strong level of returns.”
ENDS
Notes to Editors
About Investec Asset Management
Investec Asset Management is a specialist investment manager, providing a premier range of products to institutional and individual investors. Employees are equity stakeholders in the firm. Established in 1991, the firm has been built from start-up into an international business managing approximately US$115bn* on behalf of third party clients. We have grown from domestic roots in Southern Africa and the UK to a position where we proudly serve a growing international client base from the Americas, Europe, Asia, Australia, the Middle East and Africa. We employ over 170 investment professionals. The firm seeks to create a profitable partnership between clients, shareholders and employees, and to exceed clients' performance and service expectations. Investec Asset Management is a significant component and independently managed entity within the Investec Group, which is listed in London and Johannesburg.
*as at end March 2015
For further information, please contact:
Sarah Kendell +61 2 8248 3741
Honner Media
sarah@honnermedia.com.au
Vian Sharif +44 207 597 1834
vian.sharif@investecmail.com
Emma Margetts +44 207 597 1844
emma.margetts@investecmail.com
The information contained in this press release is intended primarily for journalists and should not be relied upon by private investors or any other persons to make financial decisions. Furthermore, the material contained herein is for informational purposes only and should not be construed as an offer, or solicitation of an offer, to buy or sell securities either generally or in any jurisdiction where the offer or sale is not permitted. Offers are made only by prospectus or other offering materials and upon an investor meeting certain suitability standards and any other applicable requirements as required by law. All of the views expressed about the markets, securities or companies in this press comment accurately reflect the personal views of the individual fund manager (or team) named. While opinions stated are honestly held, they are not guarantees and should not be relied on. Investec Asset Management in the normal course of its activities as an international investment manager may already hold or intend to purchase or sell the stocks mentioned on behalf of its clients. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This press release contains statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Actual results may differ materially from those stated herein. Telephone calls may be recorded for training and quality assurance purposes.
www.investecassetmanagement.com