Industry Voice: Multi-asset allocation views - Emerging themes for portfolio diversification

Diversification is a core tenet of multi-asset investing. Sunil Krishnan explores thematic ideas that may help diversify portfolios in the current market environment.

clock • 3 min read
Industry Voice: Multi-asset allocation views - Emerging themes for portfolio diversification

The macroeconomic environment looks relatively positive at present, which explains why we remain overweight equities and underweight government bonds. However, we are always looking for ways to diversify our portfolios through more thematic ideas.

US healthcare and industrials are two examples. Diversification benefits come in the form of attractive sector-specific characteristics, while holding them together reduces any directional bias to risk appetite or economic growth expectations - healthcare being more defensive and industrials more cyclical.

Healthcare: A defensive sector with growth opportunities

Healthcare is the more interesting of the two, not least because our view on the economy and the natural read-through to corporate earnings does not tally up with the defensive nature of the industry. The sector tends to have quite stable earnings growth - as opposed to cyclical exposure to a pick-up in the economy - but offers two attractive features.

Firstly, while there is currently no shortage of ways to express a positive view on economic growth - for example, being long equities, short government bonds or duration, or taking any one of a number of cyclical positions available in the equity market - there are fewer options for investors to diversify with a position that could outperform if markets entered a risk-off period.

However, healthcare tends to do well when risk appetite reduces. In part, this is because its business drivers do not depend on economic sentiment and the quantity of available discretionary spending, but on factors like government spending programmes and the development pipeline of new drugs. In addition, the earnings profile and earnings growth have been more stable for the sector than the overall market.

 

 

Important Information

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited ("Aviva Investors"). Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature.

The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.

The Aviva Investors Multi‐asset Funds comprise two ranges, each with five funds (together the "Funds"): Aviva Investors Multi-asset Plus Fund range comprises the Aviva Investors Multi‐ asset Plus Fund I ("MAF Plus I"), the Aviva Investors Multi‐asset Fund Plus II ("MAF Plus II"), the Aviva Investors Multi‐asset Plus Fund III ("MAF Plus III"), the Aviva Investors Multi‐asset Plus Fund IV ("MAF Plus IV") and the Aviva Investors Multi‐asset Plus Fund V ("MAF Plus V"). Aviva Investors Multi-asset Core Fund range comprises the Aviva Investors Multi‐ asset Core Fund I ("MAF Core I"), the Aviva Investors Multi‐asset Fund Core II ("MAF Core II"), the Aviva Investors Multi‐asset Core Fund III ("MAF Core III"), the Aviva Investors Multi‐asset Core Fund IV ("MAF Core IV") and the Aviva Investors Multi‐asset Core Fund V ("MAF Core V").

The Funds are sub‐funds of the Aviva Investors Portfolio Funds ICVC. For further information please read the latest Key Investor Information Document and Supplementary Information Document. The Prospectus and the annual and interim reports are also available on request. Copies in English can be obtained free of charge from Aviva Investors UK Fund Services Limited, St Helen's, 1 Undershaft, London EC3P 3DQ. You can also download copies from our website.

Issued by Aviva Investors UK Fund Services Limited. Registered in England No 1973412. Authorised and regulated by the Financial Conduct Authority. Firm Reference No. 119310. Registered address: St. Helen's, 1 Undershaft, London, EC3P 3DQ. An Aviva company.  184850 - 12/04/2022

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