Take a closer look at how the asset allocation has changed on each of the Omnis MPS portfolios
The starting point for the Omnis MPS is the ‘strategic asset allocation’ that has been set by your financial adviser to meet your agreed attitude to risk. This is the framework that is used to allocate your money between stock markets around the world, bonds and alternative investments. Research from investment experts has shown that getting the strategic asset allocation right gives you the best chance to achieve the highest returns on your money for the level of risk you’re willing to take.
The strategic asset allocation defines the long term allocation of the investments we hold in the portfolios. The investments held in your portfolio are spread across different regions and depending on your attitude to risk, a range of assets. This diversification reduces the impact on performance of any individual event like the coronavirus crisis as assets react in different ways.
The strategic asset allocation for each of the portfolios is marked as circles in the previous chart.
The Openwork Wealth Services investment team can then make ‘tactical’ changes in line with external drivers and influencers on a day-to-day basis within set parameters, as illustrated by the arrows, ensuring the portfolio continues to match your attitude to risk. This means we can be either ‘overweight’ or ‘underweight’ each type of investment.
Here we give an overview of some of the key times we have put these tactical powers to work over the last 12 months.
April 2020 We reduced our exposure to US smaller companies as we were concerned about cash flow for smaller companies in the US. We also reduced our exposure to global bonds and, as a result, the US dollar. Additionally, we reduced our exposure to European equities. They had recovered since the losses earlier in the year, but there were concerns about the impact the loss of tourism would have on southern Europe.
May 2020 We further reduced our equity exposure, particularly cutting our investments in UK and emerging market equities. While Asia had been relatively successful at containing the virus, signs emerged that other emerging economies, such as Brazil and Russia, were facing increasing challenges.
June 2020 We further reduced our exposure to US equities as they had become the most expensive developed market. We increased our exposure to UK gilts, as they act as a good diversifier should equity markets fall again.
November 2020 With the uncertainty over the US election removed and the announcement of successful Covid-19 vaccine trials, we believed a change of sentiment would be positive for equities. We increased our equity allocations to the UK, Europe, Asia Pacific (ex Japan) and global emerging markets.
January 2021 The Democrats won the final two seats in the Senate, giving them the US presidency and majorities in the House and the Senate. It became clear that Joe Biden had a strong mandate for fiscal stimulus, which would be supportive for the US economy. Smaller companies in the US would be key beneficiaries, so we increased our allocations to US smaller companies.
February 2021 With valuations in global credit markets reaching peak levels, we saw an asymmetric profile of potential capital returns – small upside and relatively large downside. We decreased allocations to fixed income and moved this into cash and the Omnis Diversified Returns Fund.
March 2021 While the global economic recovery continued, China began to tighten monetary policy. This, together with the prospect of a stronger US dollar, had the potential to present some challenges for emerging markets. We saw better opportunities in Europe and therefore decreased our exposure to Asia Pacific (ex-Japan) and global emerging markets and increased our exposure to European equities. We also increased our allocation to US smaller companies as we continued to expect domestically-focused US smaller companies to continue to benefit from President Biden’s policies.
Click on the portfolio you are invested in below to see how the asset allocation has changed for each of the Omnis MPS portfolios over the last 12 months and bring to life the accompanying commentary. If you are unsure which portfolio you are currently invested in, please contact your Openwork Partnership financial adviser.
As at the end of March 2021, the portfolios had the following overweight and underweights to the different asset classes. In this video we share with you our current investment thinking and explain how the portfolios are currently positioned.
