Portfolio changes: increase rates exposure, reduce energy exposure

With interest rates continuing to rise to levels we haven’t seen for half a decade, we’re updating the positioning of the portfolios.

We’ve moved back to neutral in fixed interest, although within the asset class we’re strongly tilted to government bonds and away from credit at the moment. To fund this we’ve reduced our allocation to alternative trend following strategies. Trend following has, after a long period of struggling, worked very well over the last few months. Since the objective of central banks in raising rates (or threatening to raise them) is to stop many of these upward trends in commodity prices we think it’s prudent to take some profits in this space.

In direct equities we’ve taken profits on our remaining energy stocks and invested in more defensive domestic-focussed companies. Oil remains expensive, but the valuations of the stocks we have held now reflect several years of earnings growth, so we are continue to reorient the portfolios toward other opportunities that offer better value and stand to gain from higher interest rates and a return to normal activity as COVID restrictions are lifted.

Clients who are logged in can access the updated model portfolio files and standard text from our downloads page, and will see the full details of the portfolio changes and suggestions for implementation below.

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