By Jenne Mannion Britannic Asset Management is trimming back its overweight exposure toward Europe, ...
By Jenne Mannion
Britannic Asset Management is trimming back its overweight exposure toward Europe, while adding to its positions in UK and US.
Graeme Johnston, investment manager of asset allocation at Britannic, said exposure to the UK had been built up from an underweight position to neutral against the Caps mixed with property benchmark.
He said: "Valuations in the UK now look attractive on the back of poor absolute and relative performance in the market. This poor performance is a result of the market in the UK being somewhat light on tech stocks and more skewed toward defensive rather than cyclical sectors."
Although the fund still remains overweight in continental Europe, Britannic has taken profits following strong performance, and the fund is now less heavily weighted.
Johnston said: "The pooled pension fund's emphasis on Europe has benefited with this market being up 30% in sterling terms since the start of the fourth quarter, compared to 15% the UK and US over the same timeframe.
"We still like the European story and expect continued growth but we have seen outperformance in that sector and feel it is right to take profits. Although we predict that Europe will continue to outperform, it is unlikely to be as pronounced as it has been in recent months."
The position on the US remains underweight, although this is less so now that Britannic feels equities are now less expensive relative to Europe. Johnston said: "We do expect the US economy will slow down one way or another and therefore remain negative on the market."
He said Britannic had stuck with its views on Europe and the US, although it had reduced this European position following the strong outperformance on the Continent.
Johnston added: "The building up of our position in the UK to a neutral position is more significant and we would think it likely that our next move will be to go overweight in the UK.
"There is still a great deal of momentum in the global economy and at sector level in technology. We would not expect to raise our exposure further until momentum here has stabilised."
Britannic remains neutral in fixed interest. Johnston said although inflation is not considered a concern in the medium to long term and that bond yields represent fair value, there are however short term concerns about bond yields amid the rising interest rate environment. He said: "Japan remains slightly overweight. We feel that economic recovery will be sustained which will support the market, but this is not enough to justify more than a slightly overweight position."
The Far East remains overweight on the back of Britannic's expectations it will continue to benefit from accelerating global growth, and sustained local growth amid the bounce back from the crash in 1997.
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