Change of strategy

Research house van Eyk has launched its new strategic allocation strategy, which will see reduced holdings in equities, listed property trusts and fixed interest in response to long-term shifts in the inflation outlook.

The new strategy was developed to ensure robust returns for investors in an uncertain financial environment, with the changes reflecting where van Eyk believes the best opportunities are on a medium view.

The new strategic asset allocation strategy (SAA) reduces portfolio holdings in Australian equities, listed property trusts, international equities and fixed interest.

The sectors that will benefit from the move include: absolute return strategies; fund of hedge funds; real assets such as direct property, commodities, gold; emerging markets; and cash.

Van Eyk head of strategic research, Nigel Wilkin-Smith said disinflation has created an ideal environment for financial assets.

“In this environment, equities were an ideal investment, debt markets failed to provide adequate reward for risk and real assets lagged in an era of controlled inflation. In the future, however, the environment is less certain,” he said.

“Importantly, there has been a significant level of monetary base expansion in order to bail out struggling financial institutions. It has been a period where the highest of credit quality corporates have had to eat humble pie and pay up to recapitalise.”

According to Wilkin-Smith, in this period of high volatility, real assets such as direct property, commodities and gold should provide a good hedge against inflation, while continued development of emerging economies should underpin infrastructure spending.

“Essentially, this means that the strategies investors have been using over the past 20 years will no longer provide the same rewards and there needs to be a change in approach,” Wilkin-Smith said.