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Multi-assets: Capital Group finds “more yield in equities”

multi-assetsUS fund manager Capital Group’s “plain vanilla, straightforward” Global Allocation Fund is bucking the common bonds trend and is mostly geared towards equities.

As of the end of June this year, it had 56% in equities, 36% in fixed income and 8% cash, according to investment director Julie Dickson.

The multi-asset fund has four balanced managers and two dedicated to fixed income.

“Because rates are falling, they’re finding more in yield in the equity markets, but they’re very aware that equity markets can be volatile, so they hold back cash to preserve a bit of that capital, that risk in the portfolio,” Dickson says.

Long-term investing, though, means less need for reacting to short-term cycles, she adds.

“This fund is not a short-term tactical asset allocation fund. It does not make use of dynamics or derivative overlays of any kind to make short-term asset allocation decisions.”

The company does not have an in-house view when it comes to market forecasts. Each portfolio manager has their own way of investing and their own predictions.

“It’s impossible to predict what markets are going to do, especially when there’s so much geopolitical risk at stake,” Dickson says.

“You have a presidential election in the US next year, you’ve got Brexit in the very near term in the UK, which will have a knock-on effect in the rest of Europe. China is slowing down, other markets are growing very fast, India is doing very well. There are a number of opportunities out there.”

But, she adds: “We don’t want to try to make market predictions, we’re just trying to figure out where companies are growing. Where are they growing their assets? Where are they growing their revenues and their profits, and is it sustainable? Are they in a market dynamic that means that that growth is sustainable? Are they disruptors or are they innovators?”

According to Dickson, European companies are attractively priced with much nicer yields, meaning the fund is currently underweight the US.

*Find out more about how asset managers are positioning their multi-asset portfolios in our October magazine and here.

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