We favour an overweight emerging market (EM) equity allocation for a number of reasons The risk / return profile is attractive relative to history, as well as compared with developed market (DM) equities, and we expect EM equities to perform in line with the S&P 500 in a market downturn ‘Fear of missing out’ if current late cycle, modest non-inflation growth environment persists EM equity fundamentals and valuations supported by earnings and re-rating ...
Insurance-linked securities (ILS) can have exposure to man-made risks in addition to natural catastrophe risks, such as earthquakes or hurricanes, for which they are better known This category of exotic ILS risks includes, for example, terrorism and cyber risk Exotic ILS can make an important contribution to the stability of insurance markets While small today, exotic ILS risks are likely to be a growing segment of the ILS market in the long run
In 2018, one issue for emerging market (EM) debt was that growth was very unipolar: we had decent growth out of the US but it was fairly lacklustre in Europe. This was partly due to a succession of special factors: new pollution regulations knocked the car industry, low water levels in the Rhine impacted manufacturing and yellow vest protests in France were widely disruptive. The Brexit fiasco has not helped, either.
Although a fixed income asset, the structure of convertible bonds provides a natural asymmetry that has the potential to deliver long-term equity like performance.
GAM Systematic’s Anthony Lawler explains how investors can seek to diversify their portfolios at a time when valuations in both equity and bond markets are beginning to look stretched.