Mark Hamilton and the Global Multi-Asset Group (GMAG) have positioned the Global Allocation strategy to control volatility by underweighting equity and credit, yet they are still seeking offensive opportunities in other areas like currencies, particularly the yen. The team also added a timely overweight to duration during the early 2016 drawdown and exited the position once yields fell to unfavorable levels, relative to the risks.
They are now looking at selective opportunities in the credit market to use credit as a substitute for equity. Although investors typically think of credit as part of the fixed income universe and price credit assets relative to higher quality bonds, it may no longer be an optimal approach. Credit spreads have moved faster than changes in the equity market, so credit may actually deliver better value going forward and may provide a better source of returns. Credit may also be less volatile and have less downside than equities. As a result, Mark is starting to look at credit as an alternative to equity exposure rather than as an alternative to bonds.
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