Four Themes for the Year Ahead

Private Assets, Duraton, Factor Exposure and the Trump Question

This is not an outlook in the traditional sense of what we expect to transpire in 2024. Instead, we address the key portfolio allocation questions we think will need to be discussed this year, even if their effects may not play out for years.

Allocations to private debt look set to rise, driven by the trade-off of real return versus diversification and its role in supplying credit to the economy.

Investors have been increasing duration exposure as a reflection of higher yields. We distinguish between a tactical role of duration (in anticipation of interest rate cuts) and a potentially diminished strategic role.

Within equities, we see a strategic case for Japan and EM, with the UK market an attractive tactical opportunity. We emphasize quality as a theme underlying equity positioning. In terms of factors, this means tilting to quality/profitability and low volatility. EM equities and US small cap offer attractive opportunities for generating alpha through active management.

This is a year of elections, with the most significant one in the US. We discuss how a possible Trump victory may or may not impact allocation decisions.

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