Limited fortunes will take brave hearts - Pictet AM

Added 14th June 2016

For the next five years investors with multi asset portfolios need to be thinking in terms of a 2.5-3.0% real rate of return and even then they will need to hold a lot more high risk assets, according to Pictet Asset Management.

Limited fortunes will take brave hearts - Pictet AM

“It could be one of the most challenging environments for investors in decades,” said Pictet’s chief strategist Luca Paolini.

“I think what we’re going to get is more volatility and less returns,” he told a press briefing in London.

Pictet’s view in based on a fairly weak outlook for economic growth over the next few years, particularly in developed markets; monetary policies from world central banks moving deeper into unconventional territory; and a US dollar that is headed for a major reversal of fortune.

As a result, Paolini said, emerging market assets were set to be the best performers over the next five years at the expense of such mainstays as US stocks and government bonds. Although he also saw value in eurozone and Japanese equities relative to the US thanks to ongoing monetary policy easing.

Bravery rewarded

Even if investor do allocate more to emerging market markets stocks and bonds and less to US equities and government bonds this would still not secure an attractive risk-adjusted long term return, he added.

To achieve that investors would need to embrace alternative investments like gold and absolute return strategies, he said.

“Opportunities for generating capital growth can still be found but they will be concentrated in areas that lie a little beyond the mainstream.

“Therefore investors will need to be braver and more tactical,” he said.

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Richard Hubbard

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Richard Hubbard is the group editor at Last Word. He is responsible for the editorial content of International Adviser, Portfolio Adviser, Expert Investor and Fund Selector Asia. Richard previously worked for Thomson Reuters and has covered the financial services industry and investment themes from its offices in London, Singapore, Hong Kong and New York. Richard started his career at the Australian Financial Review in Sydney.


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