All analysts point in the same direction: a year marked by volatility and the normalisation of monetary policies. Here are some investment tips for 2018.
As for fixed income, the truth is that it should not be a priority for 2018. However, we have provided some strategies and products to balance our global portfolio with these types of assets.
As far as equities are concerned, experts still have their eye on Europe. This 2018 may come with a few surprises of volatility. For this reason, the best advice is basically active management and diversification.
Interestingly enough, these principles now apply more than ever to bonds.
Debt securities are marked by an expected rise in interest rates in the United States and the start of the normalisation of European monetary policy. This will cause bond valuations to fall.
It is recommended to be very cautious in fixed income this year. This may not be the best time and our portfolios should be focused on equity assets.
Although, without a doubt, a small exposure to this type of assets can provide an added stability in the architecture of the global investment basket.
Several analysts recommend a very active management in this scenario, as if it were equities. Those were the days when bonds could be included in the investment portfolio, time could pass and coupons could be collected, without worrying that the valuation of the assets could damage the assets.
2018 is marked by changes. Changes in monetary policy and the fear of rising inflation.
Strategy and prudence are the best advice that can be given in fixed income for 2018.
But what fixed income strategies work best in such a scenario?
Fixed income investment strategies for 2018
Long-term fixed income exposure is not recommended. These types of assets are more sensitive to inflation and will suffer more from stated intentions to change monetary policy.
There are certain managers who have a clear preference for corporate debt, leaving aside sovereign debt. The objective is clear: if we juggle credit risk, we can achieve greater profitability.
High yield” bonds are an option for those who can afford less risk aversion. Once again, however, we see diversification as the best weapon to combat credit and duration risk.
Let’s see an example of this.
Examples of fixed income products for 2018
Good management and diversification is what defines one of the best fixed income funds. Exactly the recipe so that fixed income (the little exposure we can have in favor of portfolio stability) can be of some use to us during 2018. We’re talking about Gam Star Credit Opportunities.
This fund has an annualized appreciation of 7.72% over the last three years (accumulated return over the same period of 21.93%).
How do you do it? Management, management and more management. Necessary more than ever for fixed income.
With a volatility of only 2.72%, the Gam Star Credit Opportunities, denominated in euros, is investing globally. With a maximum of 20% of the portfolio in securities issued in Emerging Markets (one of the best fixed-income strategies in the scenario described).
Government bonds, subordinated debt securities, preferred stock, convertible securities, corporate bonds and contingent capital notes make up your investment portfolio. Playing this way with credit risk; in other words, diversifying.
The fund has what fixed-income investors need for 2018, a good managerial capacity.
Management capacity and diversification is the best recipe. As the CEO of Tressis Gestión, Jacobo Blanquer, states:”Our clients do not pay us for losing money”. Perhaps this is why the mixed fund it manages, the Adriza Global FI, has little exposure to fixed income and an accumulated return of 36.86% over the last five years.
In short, fixed income is not going through its best times. A small contribution to our portfolio in search of stability is not a bad idea, as we can see from the investment policy of Adriza Global FI. Greater exposure makes it necessary to manage the portfolio with equity strategies.
Investment advice on variable 2018
In line with the above, for 2018, active management of this market is also recommended.
This year has seen a marked increase in volatility, which could jeopardise our profitability if we lose sight of the situation.