Corporate earnings growth and a strong national economy make the US the most attractive region for a multi-asset portfolio.
Citywire AA-rated Schoenhaut, who co-runs the fund with Citywire + rated Talib Sheikh, said his central themes for 2015 consist of a gradual re-acceleration of the US economy, the start of Fed rate hikes and a rather uneven global growth, which will all combine in a longer but flatter business cycle.
‘The US is our preferred region for asset allocation and we have more than 50% of the fund invested in various US asset classes,’ he said.
‘While equity dividends tend to be lower, the outlook for corporate earnings growth is strong. We can access the strength of the US by going across the capital structure, so we’ve done that with allocations such as convertible bonds to access their more attractive dividend yields.’
Schoenhaut sees the global economy, led by the US, moving into mid-cycle - a backdrop that should remain generally supportive for risk taking.
‘2015 will likely be supportive for the US dollar and US equities, while the combination of rising interest rates and global disinflation suggests the US yield curve will continue to flatten,’ he said.
‘Despite expecting some pick up in global growth in 2015, we see a persistent bid for duration from global central banks meaning there is room for stocks multi-asset portfolios.’
The great rotation
Elsewhere, the Citywire AA-rated manager continues to think equities are the best place to be, notably developed market stocks. As he told Citywire Global two months ago, he thinks the dividend yield from European equities continues to look attractive.
‘We believe equities will outperform bonds, primarily lead by rising equity prices rather than falling bond prices. Broadly we are rotating from fixed income type assets into equities,’ he said.
‘We are maintaining a meaningful allocation to developed markets, particularly US equities, and we expect the US economy to remain strong.’
Within credit, his positioning in high yield debt is lower than it has been historically. ‘We remain relatively constructive on the sector because fundamentals are supportive and default rates remain low, but we are finding more attractive opportunities elsewhere.’
Over the five years to the end of December 2014, the JPM Global Income fund returned 46%, while the LCI MSCI World Barclays Global index rose 39.89% over the same timeframe.