e-fundresearch.com: What are your personal lessons learned from 2014 market developments?
Lutz Engberding: The year reminded us how dangerous consensus trades can be. Last January the vast majority of analysts expected US treasury yields to rise and many fixed income funds were positioned accordingly. The opposite happened and developed market government bonds posted a year of very strong returns, despite a strengthening US labour market.
e-fundresearch.com: With regards to 2015: How optimistic is your view of the future and what obstacles and challenges should investors be prepared to overcome in 2015?
Lutz Engberding: I am more optimistic about global growth than many others. The ECB is committed to stimulating the eurozone economy and falling energy prices should provide a boost to growth which is underappreciated. In my view, the main risk is China. The news coming from the property sector, which constitutes a large part of the economy, is worrying. In past decades the world relied on China as a growth engine but signs of a slowdown are evident. Another key risk is the substantially reduced financial market liquidity as banks have shrunk their dealing books and are less willing to ‘warehouse’ risk.
Hinweis: Lutz Engberding (Insight Investment) ist Speaker beim
ARC Outlook 2015 am 21. Jänner in Wien
e-fundresearch.com: Why should investors consider an increase in allocation to fixed income in 2015?
Lutz Engberding: Rates are very low so even a small rise in yields can cause negative total returns in a long-only fixed income mandate. This is because the cushion from carry and roll-down is much lower than it would be with rates at higher levels. At Insight we run a range of absolute return strategies which aim to provide an alternative to long-only investing.
