View the article online at http://citywire.co.uk/wealth-manager/article/a758509
Performance review: How Coutts’ Higgins is preparing for 10% US correction
by Elsa Buchanan on Jul 01, 2014 at 14:28
Coutts’ chief investment officer Alan Higgins said tightening by the US Federal Reserve next year could result in a 10% correction in US equities, which investors should view as a buying opportunity.
‘In terms of the tipping point [for equity markets], we’ve been more cautious in our allocation on the back of the knowledge that the US will tighten their monetary policy,’ he said.
‘The big risk is not China or Ukraine, it is US monetary policy. We know it’s going to happen and our view is that it will be later rather than sooner because [Fed chair Janet] Yellen and the Fed are very dovish.’
That said, Higgins anticipates a ‘tradable correction of 10%, rather than a crash’. ‘In terms of managing portfolios, you want to be reducing risk going into it and buying on the tightening,’ he added.
In the firm’s multi-asset balanced fund, which has a 55% allocation to equities, he has reduced his US exposure to an underweight 5.2%. This exposure is gained through two S&P 500 ETFs and the William Blair US Small-Mid Cap Growth fund.
Coutts’ team has also bought master limited partnerships trackers to diversify and play the US infrastructure theme.
In a contrarian call, he has upped his exposure to emerging markets (EM), moving overweight as he is encouraged that the strong outflows from the asset class have abated.
‘Being overweight EM is partially a reflection that developed markets, especially US equities are much more expensive, and there has been a value argument for some time,’ he said. ‘We are playing global growth momentum through a number of EM exporter companies.’
Within this segment of the portfolio, he holds the db x-tracker CSI 300 and the Lyxor FTSE MIB ETFs along with the Kleinwort Benson Dividend Plus EM fund.
Meanwhile, Higgins has maintained his Japanese allocation through currency hedged exposure to the Citywire Selection pick Polar Japan fund and db x-tracker MSCI Japan ETF.
News sponsored by:
As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.
Today's top headlines
From Nigeria to Pakistan and from Kenya to Kuwait, frontier markets are catching investors' attention as never before.
More about this:
Look up the funds
- William Blair SICAV US Small-Mid Cap Growth I GBP
- KBI Dividend Plus Emerging Markets EUR A
- Polar Capital Japan I GBP
- Hermes Sourcecap European Alpha Z GBP Acc
- Pictet-Emerging Local Currency Debt-I USD
- BlackRock Gold & General A Inc