Investment Strategy Paper

• Download QSP - March 2009

QSP Excerpt

Looking back at our last QSP, markets have played out much as we expected: equities continued to struggle but emerging markets did relatively better, credit spreads came in a bit, domestic bonds rallied further, while the currency declined some more. This gives us little comfort.

All in all it has been another tough quarter for risky assets, the only positive being the rate of decline has declined.

Valuations look increasingly attractive, but for how long have we been saying that? Importantly, we have stayed true to the two indicators we’ve come to rely on during the crisis: the state of the US housing market and financial sector credit. While there has been some improvement in the latter, the rate of US house price declines still looks troubling.

Accordingly the portfolios remain underweight growth assets. However, we did make an incremental addition to emerging markets and global bonds over the quarter, with the positions funded from cash and domestic bonds.

The themes we expect to play out over the course of this year are not just 2009 themes. It risks sounding a tad melodramatic but the themes are weighty and amount to what might be better described as “themes for a new world”.

The questions we have to consider are not just the length and depth of the recession and the timing of the recovery. We also need to think about: what the key drivers of growth are going to be; how persistent global imbalances correct from here; and the balance of growth between developed and emerging markets. How these issues play out won’t just determine investor returns for 2009, but for many years to come. 

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For further information please contact:

Ralph Little, Spicers Public Relations

09 374 1845