WealthSelect ad hoc rebalance (21 October 2022)

Ongoing monitoring and management

We continually monitor the market environment to manage the overall risk and return profile of your clients’ portfolios. One element that previously differentiated the positioning of the portfolios was the underweight to traditional fixed income. Following the extreme sell-off in government bonds this year we have decided to add to our holdings in this space.

Specifically, we have used our cash holdings to increase our exposure to global government bonds across risk levels 3 to 7. We have added to the Aviva Investors Global Sovereign Bond Fund in the WealthSelect Managed Active, Managed Blend, and Responsible Active Portfolios and to the HSBC Global Government Bond Index in the Responsible Blend Portfolios.

Stuart Clark, WealthSelect portfolio manager, comments:

“We set a high bar to carry out a rebalance outside of our quarterly periods. Given the challenging economic backdrop and how far government bond yields have come, it felt that now was the right time to take advantage of our flexibility and add to our exposure in the fixed income market.

“We have historically been underweight fixed income as a result of years of loose monetary policy and rock-bottom interest rates. We have since seen a dramatic shift in policy from central banks as inflation has run rampant and proved stickier than feared. With inflation now appearing to moderate, and much of the world facing or experience a cost-of-living crisis, it is natural that we will see economic growth challenged.

“As a result, while we don’t expect a sharp reversal in interest rates, we do see central banks needing to pivot at some point next year. The diversification benefits of fixed income should begin to shine again after what has been an incredibly difficult year for the asset class. It is also an asset class we will continue to watch with intrigue as we come up to our next scheduled rebalance in December.”