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Stay invested, but hedge: Deutsche Bank WM CIO

Stay invested, but hedge: Deutsche Bank WM CIO

It is a time to stay invested, but hedge.

This is what Deutsche Bank Wealth Management is recommending to high-net-worth investors in the third quarter.

The German lender said risk management in portfolios can have many forms, from different sources of hedging through to diversification, selectivity and active management.

While there has been recent moves in high yield and emerging market bonds, developed market government bonds are definitely not a safe haven any more.

Diversification must be another key portfolio aim, urged Christian Nolting, Deutsche’s global chief investment officer. He said one way of achieving this is through alternative investments like hedge funds.

‘Some liquid or illiquid alternative investments may have a valuable role to play in portfolios, due to their correlation characteristics in potentially difficult market environments.

‘Rather counterintuitively, their use in portfolios may follow the shape of a rather skewed bell curve, and not a straight line or even distribution, with balanced strategies benefiting from a bigger allocation to alternatives than higher-risk, equities-driven approaches or strategies at the lower end of the risk spectrum,’ he explained.

Deutsche’s chief invest office continues to see long-term positives in Asia's emerging market equity, particularly in the technology sector. US equities is another area the team favours.

On the fixed income side, while opportunities remain, Deutsche is advising investors to be selective. It is cautious about sovereigns and high yield, but is showing positive sentiment towards emerging market hard currency bonds and emerging market hard currency debt.

Deutsche expects oil prices to slide back towards previous lower levels as production increases. In the case of China, despite the trade tensions, it believes the country will keep growth levels high, thanks to robust domestic consumption. 

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