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Asset Allocation Week wrap-up: Be cautious and selective to weather the storm

Sarah Kendell
— 1 minute read

Following our discussions with fund managers this week, it’s clear that caution and being selective about what and where you invest is key to navigating what may continue to be volatile times ahead.

Firstly, in terms of income investing, as global central banks continue to drop rates in order to stimulate economies to counter the effect of coronavirus, retirees will come under pressure. It’s important to ensure clients do not move further up the risk curve than they are comfortable with in order to chase yield, and that they consider broader opportunity sets outside of high yield equities and hybrid securities when it comes to income, as Schroders' Mikhel Kase points out.

Secondly, while the domestic property market appears to be recovering well from last year’s lows, with the geopolitical situation likely to have some impact, it will pay to be selective about where you’re investing. While the Sydney and Melbourne markets are still quite overheated, opportunities are available in the Queensland market as well as in non-residential sectors, according to Trilogy’s Philip Ryan.

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Finally, while markets and investors may be reeling from dramatic corrections in global equities markets in the past days, those with longer time horizons should be on the hunt for buying opportunities, particularly in the global small and mid cap space, where Australians have traditionally had small allocations, says Bell Asset Management’s Ned Bell.

While there is likely to be more volatility in the coming days, buying opportunities will still exist in areas that have been less affected, are trading at below fair value and have a strong growth pathway once the short-term noise of the virus has receded. This is the key message from many of the thought leaders in Australia’s funds management industry as we close out one of the most dramatic weeks in markets in recent memory.

 

 

Asset Allocation Week wrap-up: Be cautious and selective to weather the storm
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