Renewable energy, the Japanese yen, gold and US high yield could be the most effective diversifiers for multi-asset portfolios over the next year, say investment managers polled internally by BNY Mellon Investment Management.
Paul Flood, lead manager of the Newton Multi-Asset Income Fund, says renewables provide stable cash flows with a high degree of certainty around them.
“Owing to their strong cash flow generation, high pay-out ratios and high government subsidy support, we think renewable energy assets will be the most effective in smoothing returns over the next 12 months,” he says.
Suzanne Hutchins, Newton real return portfolio manager, says that holding real assets such as gold has been an important component of the multi-asset strategy, particularly during times of uncertainty.
“Over time, we believe gold should retain its purchasing power; the same cannot be said of fiat money.”
She adds that the Japanese yen could also prove a less correlated diversifier to risk assets.
Jason Lejonvarn, global investment strategist at Mellon Capital, says it is currency that will smooth returns over the next year.
“We expect to see UK and US rates increasing. This would be good as it could drive a divergence across short term cash rates and more divergence in currency markets,” he says.
BNY Mellon Investment Management sought the views among its affiliated asset managers, which also include Standish and Alcentra, for the firm’s first Multi-Asset Special Report.
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