Notwithstanding various data disappointments over the past month, mainly reflecting business surveys moderately descending from elevated levels, actual activity remains firm and the global backdrop supportive for financial markets. This environment can be characterised by modest nominal growth, ongoing central bank support and improving corporate earnings.
Since March the market narrative has suggested less enthusiasm for the reflation trade across most asset classes, resulting in investors favouring growth over value. We believe some of this pessimism has been overdone and expect that the hurdles have now been lowered for markets to be positively surprised by data or policy announcements. While there is disappointment around the Trump administration’s ability to execute on pro-growth policies, we believe that any expression of intent to implement legislation, especially cutting corporate taxes, may be enough to reassure investors. That being said, we have no desire to add to risk levels from here and we retain our modest overweight exposure in risk assets. Our risk exposures are tilted towards more specific and targeted areas of the market, whether by sector or market-cap, to reflect our degree of confidence in the near-term fundamental outlook.
Although our view remains constructive in the shorter term, we can envisage being more cautious further out. We recognise that we are in the later stage of the market cycle and investor sentiment could be more vulnerable to potential pressure points as we move through the year. In particular, we would highlight the potential headwinds of higher US interest rates and tighter financial conditions in China. Indeed, one of the key elements to a stable financial environment over the last few years has been central bank support, which has been reflected in rising valuations across asset classes. Political risks also remain elevated, particularly in the UK, where we remain underweight domestic assets.
Equities: The backdrop remains generally supportive and our view remains that a modest overweight in equity is appropriate. Valuations and performance prevent a more positive stance towards equity overall, as we are mindful of potential event risk and being in the later stage of the market cycle. We wish to remain fully invested in the US (and no more given valuations), with more targeted exposure in healthcare, industrials and smaller companies. We are maintaining overweight positions in European and Japanese equities, which favour our pro-cyclical stance. In Japan, we have taken some exposure to smaller companies in our higher risk strategies. UK equity remains an underweight position and we believe it is still too soon to repatriate overseas assets, given domestic political uncertainties. We are maintaining a bias to UK larger companies, which have performed well as sterling has weakened over the last year. We increased our EM exposure versus DM in 2016 and are comfortable with the current modest overweight positioning. Over the shorter term, we may see some consolidation as EM equity has had a good run of late, although we are reassured by the trend in corporate earnings upgrades. The longer-term structural case remains intact. We believe EM assets will be supported by improving growth prospects, policy easing in several economies as inflation trends ease and ongoing liquidity flows.
Bonds: The loss of momentum in the reflation trade has benefited bond markets through lower inflation expectations and falling bond yields. With a slightly more hawkish Fed and with the ECB likely to consider its QE exit strategy, we believe that a short duration stance remains appropriate. Credit spreads – both US corporate credit and emerging market sovereign debt (hard and local currency) – continue to tighten given the solid growth backdrop.
Property: UK commercial property has seen improving activity since the end of last year as the economic backdrop has remained resilient. Nonetheless, there are certain potential headwinds that should not be ignored including slower UK growth, increased supply and a slowdown in rental growth as occupational demand declines. We retain our underweight position, believing this to be a prudent stance in light of UK political uncertainties, as well as acknowledging the maturity of the current cycle. On a regional basis, we are primarily invested in cities outside of London, which are less sensitive to Brexit and benefitting from more attractive supply/demand dynamics. Outside of the UK, we are also looking at opportunities in US REITs (real estate investment trusts), although for now we remain wary of the impact of the Fed’s more hawkish interest rate stance.
Commodities: Concerns around the effectiveness of OPEC production cuts to counter rising US production are likely to continue to weigh on the oil price, although these forces may be somewhat offset by an improving global economic environment. We are maintaining our position in gold as we continue to see it as an important diversifier for portfolios. Industrial/base metals prices have been pressured on concerns of slowing Chinese growth and any further tightening measures could weigh on this part of the complex.
Hedge funds: While we have held a limited allocation to hedge funds in recent years on concerns around performance, we believe that increasing monetary policy divergence should create more opportunities in this sector going forward. Our preference remains for macro/CTA strategies, but we are also taking a more positive view on equity hedge strategies given the greater likelihood of increased stock dispersion (i.e. between winners and losers).
Cash: We have reasonable levels of liquidity across our portfolios both in cash and short-dated bonds, which we will invest as and when we see specific opportunities. Market volatility remains low – a situation that we believe is unlikely to persist as we move into the second half of the year.
What is the procedure for proving a missing or lost Will?
By Alexa Payet, Partner at Bolt Burdon and listed specialist in the Certainty
Contentious Probate Hub & Area
When an individual dies it is necessary to search their paperwork to establish whether they made a Will and gather information regarding their estate. This is important because the personal representatives of the estate have a legal duty to distribute the estate correctly and could be held financially responsible for any mistakes made through any breach of duty.
Where a Will cannot be found but is believed to exist there are a number of steps that can be taken to help confirm its existence, including (but not limited to) the following:
- making enquiries of the deceased’s family and friends;
- making enquiries with the deceased’s professional advisors;
- instructing The National Will Register to undertake a Certainty Will Search.
Presumption of revocation
Where the original Will is known to have been in the testator’s possession before their death and cannot be located afterwards, there is a rebuttable presumption that the Will was destroyed by the testator with the intention of revoking it. If an order for the proof of a copy is to be obtained then this presumption must be rebutted.
Procedure for proving a copy Will
The procedure for proving a copy Will is set out in Rule 54 of the Non-Contentious Probate Rules 1987 (‘NCPR’).
The application is made to the Probate Registry at which the application for the grant will be made and the order can be made by a district judge or registrar.
The application must be supported by evidence in the form of an affidavit (although during the global pandemic the rules have been amended by the Non-Contentious Probate (Amendment) Rules 2020, SI 2020/1059, to provide for the use of witness statements as an alternative to affidavits).
The evidence must set out the grounds of the application and any available evidence that the applicant can adduce as to the Will’s existence after the death of the testator or, where there is no such evidence, the facts on which the applicant relies to rebut the presumption that the Will was destroyed by the testator during his/her life.
The applicant must ensure that the Court has the best available evidence of what happened to the testator’s Will in order that effect may be given to his/her testamentary wishes.
It is important to understand that the applicant does not need to demonstrate that the Will has been lost (it is the fact of its loss which gives rise to the presumption of revocation). Instead, the applicant must establish, by evidence, that the Will was not in fact revoked.
What is a Certainty Will Search and why is it necessary?
A Certainty Will Search searches for Wills that have been registered on The National Will Register (circa 8.7 million Will registrations in the system) and for Wills that have not yet been registered in geographically targeted areas where the deceased used to live and/or work. A Certainty Will Search is extremely important as it will be necessary to notify the probate registry of any persons who would be prejudiced by the grant if the copy Will is proved. If no such person exists then the registrar is more likely to grant the application. Alternatively, if such a person does exist then you should seek to obtain their written consent to the application. The written consents can then be lodged with (or following) your application.
Oil prices rise as investors look to higher demand seen in second half
By Shadia Nasralla
LONDON (Reuters) – Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.
Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.
“The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.
U.S. West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.
Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.
China also avoided an economic contraction last year.
Investors are watching out for U.S. oil inventory data from the industry association API, due on Wednesday, the same day U.S. President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.
The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.
“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.
(Additional reporting by Florence Tan, editing by Louise Heavens)
Can Thematic Investing provide investors with growth opportunities in uncertain times?
New whitepaper from CAMRADATA explores
CAMRADATA’s latest whitepaper on Thematic Investing, considers the role this type of investing can play in asset management and explores trends that can permeate society and traverse sectors. The whitepaper includes insights from guests who attended a virtual roundtable on Thematic Investing hosted by CAMRADATA in November, including representatives from CPR Asset Management, Sarasin & Partners, Impact Investing Institute, PwC, Quilter Cheviot, Scottish Widows and Stonehage Fleming.
Sean Thompson, Managing Director, CAMRADATA said, “In these seminal times, thematic investing has the potential to shape how the future unfolds. Yet running a successful thematic fund is no easy feat – it is a bit like navigating unchartered waters trying to identify the trends and the long-term opportunities.
“Trends such as AI and biotechnology are still in their relative early days, for example, and global economies are undergoing dramatic changes. But mapping out certain trends, identifying potential sustainable returns through a unifying thread that spans multiple sectors, could help future-proof investments. “Our roundtable guests considered current key themes, which themes worked well, and which have not and how thematic investors could identify trends with the potential to offer future growth.”
The guests named themes they currently like which included artificial intelligence, China, climate change, clean energy, automation, evolving consumption, ageing, digitalisation, water, waste management, biodiversity, and board diversity.
After discussing themes that have worked or not, the guests looked at total allocation to themed funds, and whether clients might be blinded by themes to the overall risk exposure in their portfolios.
Key takeaway points were:
- Themes have a habit of coming and going. One guest recognised that automation and robotics, for example, were cyclical, which means that investors will have to think carefully about entry-points.
- It was agreed that the commodities ‘super cycle’ of the 2000s came about with the economic development of China. Many commodities-based products found their way into mainstream investing, but this is unlikely to happen again.
- One guest was surprised by some of the themes that interested their customers; with their research showing that Board Diversity was almost the lowest-ranking concern among the ESG choices they listed.
- There was correlation between environmental impact and social benefits to investing. The theme that concerns the Impact Investing Institute, which is less than two years old, is improved measurement of such relationships.
- In terms of successful themes, one clear winner due to COVID had been digitalisation.
- One theme that has not done so well is the Ageing theme focused on older people travelling and enjoying experiences abroad later in life.
- One guest said their firm used themes for ideas generation, not as a shortcut for portfolio construction. They said themes lead to good ideas, but they then spend at least three months researching a stock, so that the best themes are represented by the best investments.
- The final point was that there are sensitivities for any global investor in allocating to themes, even the biggest one of all, Climate Change.
- But on a positive note, one guest added if all stakeholders can resolve their differences on definitions such as impact and ethical investing, then more capital will be readily transferred into opportunities.
The whitepaper also features two articles from the sponsors offering valuable additional insight. These are:
- CPR Asset Management: ‘Central Banks: leading the path towards Impact Investing’
- Sarasin & Partners: ‘Theme or fad? How to invest for the long term’
To download the Thematic Investing whitepaper, click here
For more information on CAMRADATA visit www.camradata.com
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