"The higher volatility creates opportunities"
It can not be ignored: In the economic sky, dark clouds are rising. The growth rates are still positive, but the momentum is slowing down, the boom phase of 2017 is long gone. This means that in the economic cycle we are in the late phase of the upturn.
"The markets send out strong signals that we are in the second half of the expansion phase," confirms Geraldine Sundstrom. At the same time, the fund manager of the PIMCO GIS Dynamic Multi-Asset emphasizes: "Although we anticipate a slowdown in growth, we do not expect a real recession."
Nonetheless, conditions are becoming more challenging for investors given slower growth, less monetary support and generally higher volatility. The progressive cycle thus complicates decisions regarding asset allocation. "We believe the current challenges are best addressed through a flexible approach and a focus on quality in structuring portfolios," said the fund manager.
In concrete terms, this means for the PIMCO GIS Dynamic Multi-Asset Fund: The focus is on portfolio stocks that are robustly positioned, be they corporates or governments. The fund, launched in 2016, aims to generate attractive risk-adjusted returns over the entire market cycle. To achieve this, experienced fund management can invest flexibly and globally in all asset classes, regions and sectors.
Looking through the macro glasses
Important is always the view through the macro glasses. Launched three years ago, the fund incorporates a broad, cross-asset class strategy that translates PIMCO's macroeconomic views and relative value assessments into liquid markets. This special macro approach makes the fund so special compared to the peer group.
Stocks are an important building block of the strategy: "Typically, equities tend to benefit in later phases of the business cycle as earnings continue to grow," says Sundstrom. Specially robust companies have the ability to perform well in an unfavorable environment. In addition, history also shows how companies with better value factors tend to underperform and instead perform well in the period immediately following a recession.
Sundstrom is not deterred by increasing market volatility. On the contrary: "The higher volatility creates opportunities as the markets in the market can deviate from their underlying fundamentals." In addition to the necessary flexibility, the liquidity of the PIMCO experts is crucial. "It is important not to prematurely fire the powder in the portfolios in order to take advantage of specific investment opportunities," explains the fund manager.
New approaches required
A "keep it up" is the wrong way. "There is a need for approaches other than the past decade, which have generally been to build and maximize long positions in each asset class, as favorable initial valuations, combined with supportive central bank measures, ongoing globalization and efficiency gains, place investment rates into Height drifted, "says Sundstrom. Many of these factors would now develop in opposite directions and be typical of cycle late phases, which requires a more selective and prudent approach.