Partner investment strategy & research, Stonehage Fleming, London
Equities will continue to grind higher, but volatility will remain at more heightened levels.
While profits have supported market valuations to date, we do see evidence of stretched expectations, in particular within the technology sector. We therefore want to own long-only managers where valuations are a key criteria in their stock selection process, particularly in the US. In addition, we have allocated more capital to long/short equity managers.
These managers can tactically adjust their net exposure and potentially capture alpha from higher levels of stock dispersion as the more momentum driven QE rally starts to fade.
We have exited our dedicated high yield bond exposure as the return for risk taken is less favourable.
We naturally avoid more complex strategies and structures, but as we enter the later stages of the cycle, we think this will be an important differentiator.