Offshore Growth Opportunities The US economic mood appears to grow blacker by the week. In Europe, the ECB, which not so long ago predicted Euro Zone growth of 3 per cent, has started to revise forecasts
downwards. So where, asks Alaric Nightingale, is growth to come from? T he devil, as some love to say, is often in the detail. Something readers will have noticed about these monthly asset allocation figures is that our asset managers tend to tweak, rather than overhaul, their portfolios. And with good reason. If they did chop 15 per cent here and add 20 per cent there, they would give investors the distinct impression of panic. So the interesting thing to watch out for in these weightings figures is subtle change. With this in mind, probably one of the more curious ‘tweaks’ in all of these asset allocations was the one made by GM Asset Management, now under the Gerrard umbrella. Offshore Growth Opportunities & GM's Sterling GM’s sterling asset allocation model has just upped its exposure to Asian markets from 1.5 per cent to 6.4 per cent. The two sectors it has cut back on are US equities (from 25.9 per cent to 24 per cent), and cash (from 5.5 per cent to 2.5 per cent). A 4.9 per cent increase in exposure may not seem that much in itself, until one considers that, in effect, GM Asset Management has increased its Asia exposure fourfold. Offshore Growth Opportunities - Emerging Markets Emerging markets, including Asia, are currently generating quite a buzz in the fund management and investment communities. Unfortunately, though, GM, now part of Gerrard, is not currently in a position to discuss its asset weightings because of the restructuring going on with its Gerrard integration.
This is a shame, because the company obviously has some interesting things to say. On a more positive note, this month Investment International welcomes a new firm of asset managers to the panel, Guernsey-based Collins Stewart Asset Management (see note on page 14). The company believes that, although equity markets are currently oversold, the possibility of further falls remains. “Sentiment has been badly hit over the past year,” says director Kevin Boscher. “But we believe investors should not lose sight of the many factors that helped propel equity markets to all-time highs.” Offshore Growth Opportunities & Collins Stewart Collins Stewart points to low inflation levels, high productivity gains (in long-term historical terms), and central banks that have proved effective in stimulating economic growth. Collins Stewart believes that US earning per share growth will continue to tumble for the rest of 2001 but, beyond this, that falling interest rates will boost equities’ earnings streams. Boscher points out that price-to-earnings ratios and the reverse yield gap have fallen substantially from their highs, suggesting markets are pricing in falling earnings. Offshore Growth Opportunities - Boscher Conversely, Boscher says that bonds do not represent good value. He believes bonds have now become overpriced and their current levels would only become justified should the US economic slowdown become “much more pronounced”. “Indeed, any signs that Western economies are reviving, or that short-term interest rate expectations have moved too low, could be lethal for bond markets, especially US Treasury bonds,” he says. “We have already modestly trimmed our bond holdings, but are considering reducing our weightings still further in the near future.” Offshore Growth Opportunities & Roger King By contrast, Investec’s private clients manager Roger King continues to believe that bonds will represent value in the shorter term. “The combination of global economic slowdown and reducing inflation, coupled with easing monetary policy, should combine to allow reasonably positive returns for the next few months,” says King. However, King is downbeat on the prospects of equities. Reduced confidence, he says, is undermining the strong growth that preceded it. “This is particularly so in the previously front-running US economy and market, where growth and valuation levels were highest,” he says. 
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