AMP pulls back from bonds
Cash is now providing a better insurance option for investment portfolios than bonds, says AMP Capital’s head of investment strategy.
Monday, 20 April 2015
by Susan Edmunds
AMP Capital held its first quarterly media briefing for the year today.
Its analysts said the start of the year was looking a lot like 2014, as US first-quarter growth came in weaker than expected, central banks eased more than expected, and bond yields moved lower while equities have rallied.
An unprecedented level of quantitative easing, lower rates and lower oil prices have been a boon to share markets so far, especially Eurozone and Japan shares.
Eurozone shares are also benefiting from a pick-up in growth and the long-heralded recovery in earnings.
New Zealand share returns have also been healthy with reasonable earnings and higher dividends contributing to the positive economic backdrop.
All of AMP Capital’s Diversified Funds produced positive results with the AMP Capital Growth Fund delivering the best result, returning 5.0% over the quarter and 14.6% for the year to 31 March. The AMP Capital Balanced Fund and the AMP Capital Responsible Investment Leaders Balanced Fund returned 4.0% and 3.7% respectively for the quarter and 12.3% and 13.3% for the year to March. The AMP Capital Conservative Fund returned 2.7% for the quarter and 9.0% for the year to 31 March.
Head of investment strategy Keith Poore said AMP Capital’s key calls remained essentially the same as the previous quarter.
“We expect bond yields to move modestly higher over the next twelve months as the US takes the first small steps toward policy normalisation,” he said.
AMP is now overweight cash and underweight bonds because its analysts expect similar returns from cash and bonds over the medium term, but cash has a lower risk of capital loss.
Poore said he would never advise throwing bonds out of a portfolio entirely. “I still think they would offer some insurance during a negative event.”
But he said that aspect was muted because there was little room for yields to fall much further. “The yields are so low that the risks are skewed.”
The aggregate yield on global treasury bonds dipped below 1% over the quarter. Nominal yields in Europe are negative and there are very low yields in other major markets.
Poore said it was likely that insurance companies and liability-driven pension plans were regulated to own bonds and the larger gains in equities meant some funds were likely selling equities to buy bonds to rebalance to target allocations.
AMP NZ Chief Economist, Bevan Graham, said that the outlook for the global economy was “uneven”. “Despite a weak start to the year underlying economic fundamentals continue to improve in the US. That should see the US along with New Zealand remain one of the stand-out performers amongst the developed economies,” he said.
Comments from our readers
No comments yet
Sign In to add your comment
Weekly Updates including news and commentary
Today's Best Bank Rates
Today's Top 5 Deposit Rates
Find a Rate
Cash PIE Rates
10 April 2017
12 January 2017
11 January 2017
21 November 2016
12 November 2016
Disclaimer - Every possible effort has been made to keep the information in the tables and on this site as accurate as possible, however, neither the publisher, Tarawera Publishing, nor anyone engaged to compile the rates and this site accept any liability for inaccuracies or any loss suffered as a result. It is strongly advised that readers check loan details with providers. The full terms and conditions of this site can be found here.
© Copyright 1997-2017. Tarawera Publishing Ltd. All Rights Reserved.