Presentation on theme: "Global investment committee decision Research & Strategy 23 February 2012."— Presentation transcript:
global investment committee decision Research & Strategy 23 February 2012
Macro update The agreed second bailout package for Greece is an important step forward in cementing the solutions for the eurozone debt issues. However, uncertainties remain high, as the Greek programme can easily derail and parliamentary approval from other EU-countries is far from certain. Upcoming elections will also impact the situation and the European economy may be weaker than expected. Oil prices could also keep inflation uncomfortably high, leaving central banks less room for manoeuvre than assumed. In order to contain new risks of contagion, it is necessary for the eurozone to increase its firewalls further (the EFSF and ESM funds). A decision is expected at the next Euro summit of 1 & 2 March in Brussels. The ECB will launch its second LTRO program on February 29, which will add another round of liquidity to stem systemic risks in the banking system. Having said all this, the industrial cycle is on the up and this will not change overnight. The shorter term looks all right and momentum in the global economy is positive, led by the US, where manufacturing, retail sales and PMIs indicate further growth. All in all, enough reason to close our equities Underweight.
Asset allocation decision on 23 February 2012 Over the last few months ABN AMROs Global Investment Committee gradually reduced the level of Underweight equities from strong Underweight (20% less exposure than the benchmark) to slightly Underweight (7.5%). With the Greek deal agreed as it is and various positive macro surprises, it was considered appropriate to bring equities back to Neutral, using the cash positions. The rationale behind the decision can be found on the next slide. To resume our major asset class strategies for you: Equities: Neutral Cash: Remains Overweight (though at lower levels) Bonds: Underweight Alternatives: Underweight (Commodities, Hedge Funds and Property)
Equities to Neutral: Rationale Reasons to be Underweight equities in the recent past, were the following: 1. Sharp macro deterioration in Europe and the US 2. Eurozone tail risks and its systemic consequences for the financial sector 3. High volatility and poor investor sentiment Reasons to move to Neutral for equities: We have seen major improvements on all three issues in recent weeks and months, although uncertainties are still high. Equity markets have already anticipated a better environment and global markets have strongly recovered from bottom levels set in October last year. Systemic risk seems to be abating.
No change in our sector and geographical equity allocation Consumer Staples Overweight Healthcare Overweight Telecom Services Neutral Basic Materials Neutral Energy Neutral Information Techn. Neutral Consumer Discretionary Neutral Utilities Neutral Industrials Neutral Financials Underweight EM Latin America Overweight EM Asia Pacific Overweight North America Neutral Developed markets Asia (ex Japan) Neutral Europe Neutral EM Europe, Middle East, Africa Underweight Japan Underweight Equity allocation now Neutral Sector Region
No change in our bond allocation Bond portfolio allocation
Asset allocation per 23 February 2012 USD&EUR Risk profiles % Asset allocationIIIIII Asset Class (%)StrategicTacticalDeviationStrategicTacticalDeviationStrategicTacticalDeviation Money Markets529+24525+20520+15 Bonds*9066-247052-185542-13 Equity Markets **0 015 30 Alt. Investments5 5108-2108-2 Funds of hedge funds 5 5 5 5 5 5 Real Estate 0 0 3 3 3 3 Commodities 0 0 2 0-2 2 0 Total (%)100 Asset allocationIVVVI Asset Class (%)StrategicTacticalDeviationStrategicTacticalDeviationStrategicTacticalDeviation Money Markets514+959+457+2 Bonds*3528-71513-200 Equity Markets **50 70 85 Alt. Investments108-2108-2108-2 Funds of hedge funds 5 5 5 5 5 5 Real Estate 3 3 3 3 3 3 Commodities 2 0-2 2 0 2 0 Total (%)100 *Recommended duration 4,25 years in USD and EUR profiles (Neutral). Benchmark: BoA ML Government :1-10 years. ** Foreign exchange exposure: Only equity markets and a small portion of alternative investments are exposed to foreign currencies. ***Allocation of 10% (depending on the asset allocation profile) into High Yield (HY) with a preference for US fund, but with a cap of 3% of the total allocation.
Asset allocation of our oldprofiles per 23 February 2012 USD&EUR Risk profiles % Asset allocationConservativeBalancedGrowth Asset Class (%)StrategicTacticalDeviationStrategicTacticalDeviationStrategicTacticalDeviation Money Markets1019+91021+111023+13 Bonds*7063-74031-92011-9 Equity Markets **10 40 50 Alt. Investments10 8-210 8-22016-4 Funds of hedge funds 5 5 5 5 10 Real Estate 3 3 3 3 6 6 Commodities 2 0-2 2 0 4 0-4 Total (%)100 * Recommended duration 3,5 years in USD and EUR profiles (Neutral). Benchmark: Citigroup Government :3-5 years. ** Foreign exchange exposure: Only equity markets and a small portion of alternative investments are exposed to foreign currencies.