Cover story – Asset allocation


While financial markets entered the new year with caution, some investors are asking if central bank rate hikes could peak sooner than expected? The answer is set to shape institutional asset alloca- tion, finds Andrew Holt and Mona Dohle.


Investors could be forgiven for entering the New Year with an uneasy feeling. Inflation, although expected to fall, is likely to remain elevated this year and interest rates are on track to rise. These two factors would force investors to adapt their strategic asset allocation to the much-touted term ‘the new normal’. This, one would assume, should mean a shift to less riskier assets. But as this year has progressed, investor caution has been fol- lowed by a paradox. While one would have expected investors to sell risk assets, stock markets rose. After an abysmal 2022, the FTSE100 hit a record high in February, while the S&P500 is up 7.6%, year to date.


16 | portfolio institutional | March 2023 | Issue 121


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