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Andrew Cole: ‘once in a lifetime’ equities-buying opportunity is near

Andrew Cole, manager of the Baring Multi-Asset fund, believes that a ‘once in a lifetime buying opportunity’ in equities is coming.

 
Andrew Cole: ‘once in a lifetime’ equities-buying opportunity is near

Andrew Cole, manager of the Baring Multi-Asset fund, believes that a ‘once in a lifetime buying opportunity’ in equities is coming.

Cole tempered this view, which echoes that of Fidelity’s Sanjeev Shah, by remarking that in order for this to occur, bond yields will have to normalise from their record lows.

This is an event he does not envisage happening at any point during the next couple of years because it requires persistent economic growth. The greatest challenge facing investors is working out the timing of this economic conundrum.

Cole’s view on emerging markets and China has softened in recent months. He points out that the world’s second-largest economy troughed in the summer of last year.

He has elected to invest 7.4% of the fund in the iShares Emerging Markets ETF until he can assess which active managers and countries he is most keen on.

On a country level, he is leaning towards China over Korea, Mexico over Brazil and sees some promise in Russia and Eastern Europe. One issue that he feels is starting to rear its head in the emerging world after a brief hiatus is inflation.

While he is comfortable with the idea of 8% growth in China at the expense of 4% inflation, he feels the issue has got out of hand in Brazil, supporting his avoidance of the country.

To finance this emerging market play, Cole has entirely disposed of his longstanding position in Australian government bonds.

‘They have offered better diversification benefits and have performed in line with UK gilts,’ he says. ‘When the portfolio has had bad days they have tended to perform well. However, they don’t yield 5.5% any more.’ 

Significantly, though, those returns have been achieved despite hedging out the Australian dollar, a move he admits has cost the portfolio performance.

However, with UK gilts as his reference, their similar level of return and lack of correlation more than makes up for the lost currency gains.

Cole has also reduced his allocation to a pooled vehicle of high-yielding global multinationals, believing their performance has been such that they are priced for perfection.

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