Asset Allocation 360° - Draghi Unchained

Welcome to the seventh edition of Asset Allocation 360°

They may have once seemed like the sleepy watchmen of a quiet town, but the financial crisis has galvanised central banks, spurring them to take action to kick-start global economies.

The last quarter alone has seen Japan launch a radical and unprecedented stimulus package in an aggressive move to end deflation and get the country back on track as part of their unconventional monetary policy in these desperate times. In fact, things have becomes so extraordinary the notion of negative interest rates was recently mooted by the Bank of England's Paul Tucker, as a catalyst to restart bank lending.

Although the idea came under heavy criticism from a number of angles, Tucker's comments pushed the role of the central bank, as well as its policy and the tools at its disposal, firmly into the limelight.

As Odey's Time Bond discusses in our lead feature, this recent spate of activity is to be welcomed as part of a wider reformation of central banking.

However he notes that society has so far failed to come up with a robust framework for a new, broader remit and that this lack of certainty must be addressed immediately, otherwise the current state of anaemic economic growth will only be exacerbated.

It's time the bank’s target growth as part of their remit, rather than primarily focus on inflation in an era when this objective is arguably not the main, or at least only, concern.

Yet when it comes to asset allocation, the central banks' actions of pumping liquidity into the system is distorting markets and is encouraging investors to take excessive risks in order to find returns. In our section Top Global Asset Allocators; our four experts reveal how this form of financial repression is influencing their portfolio decisions.

We hope you find our quarterly strategy guide useful; for your asset allocation needs, at a time when convention has gone out the window and investment decisions become increasingly tougher.

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