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Baring multi-asset fund performs strongly in 2011
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Manager Andrew Cole cautious on markets but does not rule out returning to equities
The Baring Multi Asset Fund has performed well throughout 2011 and the recent market volatility, benefitting from its dynamic asset allocation strategy and swift reaction to economic triggers. It has registered a top quartile ranking in the IMA Cautious Managed peer group over one, three and 12 months.
Rod Aldridge, Head of UK Retail Distribution at Barings comments, "We are delighted with the continued positive response to our Multi Asset Fund from the market. Andrew and the Multi Asset Team have a very strong track record and been managing dynamic asset allocations strategies since 2002. The team has benefited strongly this year from the ability to swiftly move in and out of asset classes as our scenario-based economic analysis dictates and clients and intermediaries are responding well to our growing reputation for successfully managing to preserve capital while also capturing returns."
Throughout 2011, the Fund has become increasingly cautious in its asset allocation strategy, moving away from risk assets as economic indicators continue to point to a very unsettled outlook for the months ahead.
Andrew Cole, Director of Asset Allocation at Barings and manager of the Baring Multi-Asset Fund commented, "Global markets have experienced remarkable volatility in recent months with risk assets such as equities coming under significant selling pressure as investors have sought safety in perceived safe haven assets such as government bonds and gold. At Barings we have been saying since the start of the financial crisis in 2007 that the recovery in the west would be long and painful. Our economic growth forecasts were lower than most this year but even we have had to pare back our expectations as events have unfolded over 2011.
"The Multi Asset Fund was defensively positioned heading into this period and this has helped to successfully mitigate the impact of heavy falls in equity markets. The fact that the Fund has managed to generate a positive return over the last three months is a notable achievement in itself, particularly as most indices suffered double-digit declines. Over July and August we further scaled back the equity exposure of the fund to around 20%, down from more than 40% at the end of March. We have also reduced our holdings in convertible bonds. Increasing our exposure to long-dated government bonds, principally in Australia and the United States which rallied strongly as risk aversion grew.
"Elsewhere, we have continued to add to our gold bullion position and despite the derisory rates available, increased our holding in cash to around 20% of the fund. We liken cash to a call option on uncertainty although like any option it will be expensive to hold for long.
"Our core view from here remains that we are in a period of sustained weaker global growth as opposed to an outright recession. For investors, the question now is whether global equity markets have sold-off enough to create a legitimate buying opportunity. As valuations continue to fall, our analysis suggests that the risk premia available in equity markets are becoming more attractive, however we would like to see a more convincing bottom achieved and signs that the market has fully embraced a more pessimistic outlook before we upgrade risk assets and meaningfully increase our exposure to equities."
The Baring Multi Asset Fund aims to deliver a capital return which exceeds UK inflation over the medium to long-term.
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