Investment Line is a regular investment bulletin produced by Mattioli Woods plc. The communication provides an update on funds, highlights some of the areas we are currently focusing on, and our thoughts on the issues of the day.
We remain cautious as markets continue to exhibit complacency against a backdrop of high valuations and political risk.
Global equity markets remain in optimistic mood, chiefly driven by the US and expectations of a pick-up in global growth. For UK investors, a weak Sterling has helped.
UK smaller companies have made up some of the ground lost last year, and we continue to think the best opportunities will be at this end of the market cap spectrum. Concerns over the UK are likely to remain though, and Brexit negotiations are fraught with risk. We are likely to stay underweight UK equities.
Our lack of belief in the case for global growth means portfolios heavily feature specialist allocations where we feel companies can benefit from key themes in the investment universe and are likely to grow irrespective of wider macro-economic developments.
We have seen how quickly bond markets can ‘turn’ and the fixed income space offers an unattractive risk-return profile, generally speaking. The holdings we do have are closely monitored to ensure a low vulnerability to changing inflation/rate expectations.
We are holding overall allocations for now, continuing to focus exposure on closed-ended funds and regional property, expecting the income to be most of our return in 2017.
Absolute return funds offer a variety of strategies to maximise risk-adjusted returns and perform a useful role in portfolios; some funds have been disappointing of late, but the range of different strategies means the attractions of an allocation remain, particularly as cross-asset correlations may be weakening.
Cash is retained at the levels held previously.
Investment Line is written and edited by members of the Mattioli Woods Group Investment Committee, and is for information purposes only. It is not intended to be an invitation to buy, or act upon the comments made, and all/any investment decisions should be taken with advice, given appropriate knowledge of the investor’s circumstances.
Mattioli Woods plc is authorised and regulated by the Financial Conduct Authority.