Presentation on theme: "global investment committee decisions"— Presentation transcript:
1 global investment committee decisions Research & Strategy ABN AMRO Private Banking16 August 2012decisions
2 Strategy reviewThe ‘muddling-through’ scenario that ABN AMRO adopted quite some time ago is still very valid. Its major implications are that the eurozone is moving slowly but surely to a final resolution of its sovereign debt crisis, thereby forcing the global economy into a softer patch. There were two important developments in the last few months that have impacted financial markets noticeably:The EU Summit of end of June resulted in a number of decisions with substance:The EFSF / ESM rescue funds were granted permission to provide direct financial support to banks.The setup of a eurozone banking supervision framework was agreed as well as the funding of a growth agenda.The ECB has indicated a conditional bond buying willingness that has the potential to exceed by far the size of earlier programs.Both developments provide mechanisms to reduce uncertainty.
3 Global Investment Committee decisions: 16 August 2012 The decision was taken to move Real Estate from ‘Neutral’ to ‘Overweight’ in our model portfolio, from 3 to 5%, at the expense of Cash.Rationale: The slow growth / low interest rates environment is extremely beneficial to real estate. The listed property sector in Asia is by far the best performing asset class so far in In general, the sector is supported by modest valuations and its attractive and stable yields from quality investments. As we assume that interest rates will not go up much and that growth will remain subdued for some time, conditions could remain very positive. Regional differences are substantial, leading to quite different valuations and expectations across the globe. Quality stocks and premium locations are recommended, in the belief that slippage of yields will largely be avoided in those parts of the market. We recommend to increase the allocation into property from a Neutral into an Overweight position, while maintaining a regional preference for the US (Overweight) against a Neutral for Asia and an Underweight for Europe. Risks to this position include a substantial rise in interest rates, a collapse in stock markets, and/or a strong cyclical recovery in the world that would lead to underperformance of property vis-a-vis other asset classes. All other allocations remain unchanged.
4 Latest ABN AMRO asset class recommendations 16 August Equity allocation « Neutral »Equities ‘Neutral’Bonds ‘Underweight’Alternatives ‘Overweight’:- ‘Overweight’ Hedge Funds- ‘Overweight‘ Real Estate- ‘Underweight’ CommoditiesSectorRegionHealthcareOverweightIndustrialsConsumer StaplesNeutralBasic MaterialsEnergyInformationTechnologyConsumerDiscretionaryUtilitiesTelecommunicationsUnderweightFinancialsEmerging MarketsAsia PacificOverweightLatin AmericaNorth AmericaNeutralEuropeDeveloped Markets Asia (ex Japan)Eastern Europe, Middle East and AfricaJapanUnderweightBond allocation « Underweight »Source: ABN AMRO Private Banking
5 Asset allocation of our model portfolios16 August 2012 Asset allocation of model portfolios showing USD and EUR risk profiles in % (adjusted on 16 August 2012)Asset allocationIIIIIIAsset classStrategicTacticalDeviationMoney markets518+13▼ 14+9▼ 11+6Bonds*9074-167058-125546-9Equity markets1530Alternative investments8+31013Funds of hedge fundsReal estate3▲ 5+2Commodities2-2Total (%)**100IVVVI▼ 8▼ 4-1▼ 2-33529-65085▲5The Global Investment Committee has decided to increase the portion of the portfolio allocated to hedge funds for the following reasons:Macro managers are skilled at navigating in periods of structural changeCTA is mainly uncorrelated with most traditional asset classesManagers have included tail-risk managementPositive active strategies are mainly:Investment-grade bonds, Asian corporate bonds, US high-yield bondsEmerging-market equities and real estateHedge fundsMitigate risk:With a buffer of cashBy avoiding commoditiesWith a minimum of core-government bonds* Recommended duration: Neutral. Benchmark: Bank of America, Merrill Lynch Government Bonds 1 – 10 years.** Foreign exchange exposure; only equity markets and a small portion of alternative investments are exposed to foreign currencies.555