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Adviser  >  News  >  July 2008  >  Managed Fund Allocation Review – July 2008

Managed Fund Allocation Review – July 2008

Robert Talbut, CIO of Royal London Asset Management reviews his recent asset allocation decisions for the Scottish Life Managed funds and gives his current market views including why he favours cash for the short-term.

Asset Allocation Review

Throughout the month we continued to take a relatively cautious approach within the portfolios, being very underweight within equities and trying to hold more secure financial bonds within our credit portfolios. In addition we’d held a relatively large position in cash against a zero benchmark. The most significant asset allocation move that we took was to buy UK gilts after they’d sold off on inflation concerns, as we took the view that the economic clouds would darken and growth expectations would be pretty sharply cut. Within equities the only shift was a further move out of UK equities and into the US. This was due to firstly a view that sterling will weaken against overseas currencies; secondly that there is more policy flexibility in the US relative to the UK in order to mitigate against the slowdown in economies; and lastly that the resource stocks within the UK market may come under pressure in the second half, notwithstanding the strong medium term fundamentals, as global growth comes further off the boil.

Outlook

We don’t as yet see strong reasons why we should fundamentally shift our reasonably cautious approach in the immediate future. The combination of inflation being too high and growth slowing provides a significant constraint to policy makers. We see further falls in corporate earnings forecasts, and think that there will be further twists from the credit crunch. However it is possible that this combination could at some stage provide a good buying opportunity for risk assets, but we intend to hold a reasonable amount of cash in the meantime.