Asset Allocation

Current views - February 2019

Our investment team assesses the prospects for a range of asset classes and currencies



Asset classes



Reasonable valuations and moderating growth, but peak earnings growth lead us to be neutral on equities.



We prefer USD bonds versus EUR and GBP bonds. More attractive valuations in US inflation-linked and emerging market bonds.



Attractive diversification characteristics compared to equities and bonds. More cautious on UK commercial property.



Cash has defensive and opportunistic qualities in uncertain and volatile markets.





Brexit uncertainty continues to weigh on sentiment.



Slowdown in domestic economic growth and the uncertainty around trade tension continues to be a headwind.


North American

Economic fundamentals and earnings growth are relatively attractive versus rest of world.



Increasing concern about the impact of the upcoming consumption tax hike.


Asia Pacific

Slowing Chinese growth and trade tensions remains a headwind but a weaker dollar should be supportive.


Emerging markets

Valuations and fundamentals look attractive relative to developed markets, and a weaker dollar should be supportive.




Government bonds

US Treasuries are relatively more attractive given a more supportive Federal Reserve.


Investment grade

Returns are likely to be driven largely by government bond markets. While corporate spreads are close to post 2009 averages, we are mindful of increasing company leverage and the lateness of the economic cycle. UK spreads have been particularly affected by Brexit concerns.



Volatility will likely continue and will offer opportunities if spreads move sufficiently in either direction.



US inflation-linked government bonds are attractive compared to conventional ones and will outperform if inflation expectations rise again. Elsewhere they are fairly valued.


Emerging markets

Emerging market bonds generally offer good value and should continue to benefit from a weaker US dollar.




Absolute Return

Increased volatility and dispersion should provide opportunities. We favour trend followers and long/short strategies.


Commercial property (UK)

A general increase in concern for the UK commercial property environment, but income characteristics remain attractive.



Gold is attractive as a diversifier, portfolio insurance and an inflation hedge.




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Alexander Prinz von Hessen

Alexander Prinz von Hessen

Geschäftsführender Direktor