Jessica Fannin

Though locally interest rates have been cut, they are still relatively high and giving investors the opportunity to attain decent return above inflation at a meaningful degree of certainty. These local fixed income assets are a cornerstone for our portfolios at present, when we apply an outcomes-based investment philosophy.

Within our portfolios, we are closer to our strategic allocations than last quarter as conviction over some active bets has been reduced. Our investment committee has increased offshore allocations from a large underweight to a slight underweight. The expectation that the Trump administration would be supportive of a stronger dollar from an economic policy standpoint will likely keep emerging market currencies under pressure. Similarly, while we believe local equity remains attractive, the change in valuation has allowed us to trim the asset class.

From a valuation perspective, US equities in particular are not attractive, and we remain invested in active managers and equity styles that give exposure more broadly than the large technology focus in the index. Emerging market exposure has been increased to slight overweight as we balance the attractive valuation against macroeconomic risks with the Middle East conflict and possible trade tariffs as examples.

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