We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".



Twitter board

Follow us
  • My week on Twitter 🎉: 2 Mentions, 3.3K Mention Reach, 5 Likes, 6 Retweets, 7.76K Retweet Reach. See yours with… https://t.co/IZfviidt4H11 hours ago
  • Friday View: Trustees feel the heat over climate change - bankers' pensions back in black - TPR suspends trustee -… https://t.co/kUKa8QUF9w2 days ago
  • Increased regulatory oversight will be risk-based, TPR keyperson will meet schemes deemed riskier several times a y… https://t.co/wUiKPGESaU4 days ago
  • Lesley Titcomb, TPR chief executive says change is on its way, the regulator will increase oversight between valuat… https://t.co/Wu8Pv6TfqS4 days ago
  • Join us and @AonRetirementUK on the 4th of July at the luxurious Victorian Bath House featuring educational presen… https://t.co/r1abr8Qls05 days ago
  • DWP wants trustees to feel the heat over climate change https://t.co/bs25DvyWGF #ESG #climatechange https://t.co/dZEXB0g8a45 days ago
  • My week on Twitter 🎉: 3 New Followers. See yours with https://t.co/mCw3VcMQGw https://t.co/3kEHNr3xyz7 days ago
  • Friday View: Heathrow's £325 million buy-in - Auto enrolment for the gig economy - Brunel opts for ACS structure -… https://t.co/vsnML1Vzb59 days ago
  • Pimlico Plumbers- Could gig economy workers be auto enrolled? https://t.co/qgrlWxMUW8 #gigeconomy #autoenrolment… https://t.co/wnDH18iPxG10 days ago
  • RT @eVestment: Workers in the #UK are open to increasing their retirement savings and tend to place greater emphasis on workplace #pensions…11 days ago
  • The June issue of portfolio institutional is now out: Featuring our take on #carillion and lessons for trustees as… https://t.co/yC2PNgoaPr12 days ago
  • RT @PensionsSion: Aon's very own John Belgrove shares his views in this piece. Worth reading... https://t.co/VYEJWjAU3z12 days ago
  • My week on Twitter 🎉: 2 Mentions, 3.29K Mention Reach, 2 Retweets, 3.27K Retweet Reach. See yours with… https://t.co/MeoES7Ch3L14 days ago
  • Friday View: South Yorkshire hedges pension risk- Recruitment execs face prison over pension scam - Johnston Press… https://t.co/9fV8Z48WtF16 days ago
  • RT @cfjescott: A recent piece of mine on the @CMAgovUK investigation into investment consultants in @portfolio_inst #investment https://t.c…19 days ago
  • Our ESG Roundtable: Better Long-term outcomes? Available to download now https://t.co/o7T8kWSwWY https://t.co/oHs4VlRK9E20 days ago
  • Active vs Passive : In 2016 investors withdrew around $285bn from active funds and pumped almost $429bn into passiv… https://t.co/tjpxhTxW5Z20 days ago
  • RT @WhtstheDiehlio: .@AitkenRL spoke with @graniteshares CEO Will Rhind about the ongoing active vs. passive debate. Check out their though…20 days ago
  • Green is the new black. A record sum is expected to be raised under the green bond banner this year, but is it doom… https://t.co/JYP8k0ZfZk23 days ago
  • Our Cover Story! Property: Solid Returns - Low gilt yields are forcing schemes to pile into bricks and mortar. Mark… https://t.co/9nyjFp0Z4R23 days ago

On the radar

Interest rates: The slow return to normality

Interest rates: The slow return to normality

Lynn Strongin Dodds
Friday 15th December 2017

Interest rates are rising, inflation is climbing and it is goodbye to QE. Lynn Strongin Dodds looks at what impact these changes will have on portfolios.

“The shrinking of central bank balance sheets and the end of the extraordinary monetary policy means asset prices will no longer be based on liquidity but will be driven by fundamentals.”

Tom Wells, Aviva Investors

After bumping along the bottom for years, interest rates are starting to rise while central banks are pulling the plug on their abundant stimulus programmes. Although the moves are gradual and well flagged, experts are advising investors to review their portfolios and prepare for this slow return to normalcy.

Governments may be moving at their own pace, but as Tom Wells, a fund manager in Aviva Investor’s multi-asset team, notes: the withdrawal may be slow but the direction of travel is one way and QE is not increasing. “In our view, the shrinking of central bank balance sheets and the end of the extraordinary monetary policy means asset prices will no longer be based on liquidity but will be driven by fundamentals.”

Asset allocation, of course, depends on an institutional investor’s particular objectives, funding levels and requirements but pockets of opportunities may be harder to find going forward. “The high valuations in nearly all asset classes, the persisting economic cycle, rising inflation and less expansionary-minded central banks now make us less optimistic about the period after 2018,” says Ivo Kuiper, head of Kempen Capital Management’s asset allocation team.

“Yet sentiment is very positive, both in an economic sense and on the financial markets, and we therefore expect the equity rally to persist in the short term,” he adds. “Economic confidence indicators are high, corporate earnings continue to rise and money will remain cheap for the time being,” Kuiper says. “The expected rise in inflation means that we are slowly becoming more positive about real estate, commodities and other inflation hedges.”


Ron Temple, co-head of multi-asset and head of US equity at Lazard Asset Management, also believes that global equities are more attractive than fixed income assets thanks to robust earnings growth. “Our strong belief is that security selection will be critical to generating returns in the years’ ahead, given the risk of drawdowns on the back of unforeseen events and as different countries and companies deliver varying degrees of growth,” he says.

Temple singled out Japan in particular because the MSCI Japan Index is the “only major market index that is not trading at a substantial PE premium to an historical average, with the index trading at a premium of 0.3 times earnings relative to its 10-year median,” he adds.

“We believe Japanese companies still have substantial room to improve their returns as the macroeconomic backdrop has improved and the corporate governance reforms of recent years have better positioned many companies for future profit growth.”

Columbia Threadneedle Investments head of multi-asset Toby Nangle is also bullish on Japanese as well as European equities believing that they are well-placed to benefit from a global and synchronised cyclical upswing. “Both markets should see reflationary forces translate into higher levels of profitability for shareholders, and it is these forces that are prompting higher interest rates in the US where there appears to be little economic slack,” he says.

Page: 1 2 3

Leave your comment

View our comments policy

Please login or register with us to leave a comment. It's completely free!

Friday View

Friday View

How investor action helps cut CO2 emissions