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With rising inflation and market volatility, managers looking for opportunities

By on July 18, 2022 0

Fixed income strategies also seem more attractive to Erik L. Knutzen, managing director, co-head of the quantitative and multi-asset investment team and director of multi-asset investments at Neuberger Berman Group.

“Credit markets are closer to pricing in a recession as spreads have widened, while government bond yields have risen with tighter central bank policy,” he said. in an email. “As such, Neuberger Berman’s Asset Allocation Committee now sees more yield to work with in fixed income, but remains cautious in equities and continues to favor commodities, uncorrelated strategies and liquidity to mitigate potential volatility and enable opportunistic investments.”

Mr Knutzen also said he anticipated “high uncertainty and volatility” for at least the next nine to 12 months.

“In this environment, uncorrelated and short-term trading strategies remain useful, as does cash – both as a buffer against market volatility and as a dry powder for opportunistic investments,” he added. “The months ahead are likely to be difficult, but difficult times are when the foundations for potential long-term returns are laid.”

Equity investors, however, are going to feel like they are in a recession – whether there is technically one or not – as the valuation adjustment in the first half of 2022 is likely to be followed by downward revisions to forecasts of profits in the second half. , he said. “We struggle to see how equity markets can escape a second earnings-related selloff, following the valuation-related selloff of the past six months.”

Within its overall underweight in equities, Neuberger favors lower beta exposures, except for a more favorable view on energy (for inflation exposure) and a less favorable view on the consumer durables sector (in light of the anticipated consumer-led slowdown).

Neuberger Berman had $447 billion in assets under management as of March 31.