Schroders adds back to equities

Schroders has begun increasing the equity weighting in its multi-asset portfolios after falling to record lows as it believes the risks are now more finely-balanced.

Speaking to Money Management, Schroders head of multi-asset and chief investment officer-Australia, Simon Doyle, said the firm had reached as low as 17.5% equity weightings earlier this year in its real return funds.

The funds were allowed to have as much as 70% in equities.

He said: “We have de-risked substantially from a year ago, we reached a low of 17.5% and took cash up to 40%. Now we have added 10% to equities and have halved cash to nearer 20%. We feel more comfortable putting money back into the market than we did six months ago”.

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In the multi-asset funds, Doyle was still underweight equities but had begun putting money to work again over the last three or four weeks which meant it was now a smaller underweight.

“The risks are now evenly balanced, at the start of the year there was a lot of downside in equities and not much upside whereas now it is more even.”

However, he acknowledged these small moves did not indicate he believed the market had bottomed yet.

“There’s still more to play out, there could be fall in equities again by the end of the year, timing the bottom of the market is very difficult.

“We are watching for a valuation signal where the market becomes compellingly cheap. If we see that inflation is under control and central banks are moderating the pace of tightening then that would be a trigger for a rally in risk assets.

“Equities typically bottom when P/E is in the teens and the US P/E is currently at 18 so there is still a way to go, they are not a bargain buy yet but they are better value than they were.”