Asset Allocation Research for UK Advisers

In this article for IG, Henry Cobbe explores a fresh approach to equity diversification.
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• Cash and traditional nominal bonds are higher risk during an inflationary regime because they cannot keep pace with inflation
  
• Inflation-linked bonds typically have very long duration which means they are highly sensitive to changes in interest rates
  
• Any mismatch between duration (interest risk) and investor time horizons needs to be considered when designing portfolios
  

​To learn more, read our article in FT Adviser: 
https://www.ftadviser.com/investments/2022/11/28/understanding-bonds-in-an-inflationary-environment/​

[5 min read, open as pdf]

• Regional equity allocation is starting to look dated
• Sectors, factors and themes offer an alternative approach
• These offer greater potential for returns dispersion

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[5 min read, open as pdf]

• Economic headwinds for the UK are considerable
• The US is likely to recover faster than the UK and EU
• Advisers should consider globally diversified approach

[3 minute read, open as pdf] 

• Covid restrictions in China have choked off growth
• The government has recently moved to relax regulations
• Chinese equity markets have rallied as a result

[5 min read, open as pdf]

• Good in theory, problematic in practice
• Advantages and disadvantages
• Changing market regime

There is an investment case for investing in private markets, and the asset class has proved popular with institutional investors, including those with long-term time horizons and high liquidity tolerance – such as endowments.  But not every endowment has enjoyed the success of the early adopters under the “Swensen model”.
A private market allocation is structurally hard to reverse if things go wrong with any of 1) the investor’s liquidity needs, 2) the private market fund’s underlying investments, or 3) the realised returns relative to risk-free investments (e.g. gilts) for a given term.
As such, an allocation to private markets should be seen more like an irreversible decision, unlike almost all other investments available to institutional investors which can be sold at a day, week or month’s notice.
In this brief note, we do not set out the case for investing in private markets – that has been set out extensively elsewhere.  We do however raise some points of challenge to those stated advantages.
[Read full paper as pdf]

In this article for IG, Hoshang Daroga CFA, Investment Director at Elston Consulting, looks at the easing of Covid-19 restrictions in China.
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In this article for IG, Henry Cobbe explores looks at an alternative approach to US indices.
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UK inflation at 11.1%yy for Oct-22

• This is higher than 10.7%yy survey estimate…
• … and an increase from 10.1%yy last month
• Represents growing inflationary pressures

For full updates including charts, open as pdf

[3 min read, open as pdf]

• Concentration risk is a choice, not an obligation
• An equal weight approach reduces stock and sector biases
• This has proved defensive in 2022 market stress

US inflation at 7.7%yy for Oct-22
This is lower than the survey estimate…
… and a decrease from 8.2%yy last month
Represents lessening inflation pressures

For full update including charts, open as pdf

[3 min read, open as pdf]

• Big tech has dominated US equity indices in recent years​
• Shares have deflated as economic outlook has deteriorated
• How investors could allocate if they see a buying opportunity

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In this article for IG, Elston's Jackie Qiao explores opportunities in the tech sector.
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