Two key trends are driving global macro risks and opportunities—central bank policies and investors seeking to avoid downside risk—Brian Singer, head of William Blair’s Dynamic Allocation Strategies team, said recently in interviews with IRIS Founder Tom Lydon and RIA Channel’s Julie Cooling, founder and CEO.
Ultra-easy monetary policies have pushed prices away from their fundamental values and stay there, Singer said to IRIS’s Lydon. And as fundamental investors, that is a challenging environment. “It’s been hard for prices to equilibrate with that central bank involvement,” Singer told IRIS, adding that these ultra-easy monetary activities are slowing down and starting to shift the other direction.
The second driver is that currently no investors want downside risk, and yet, the largest opportunities—the most compensated risk—in the world exist where there’s downside tail risk, Singer said. As a result, Singer and his Dynamic Allocation Strategies team need to navigate downside risk that geopolitical events like elections in the United States, France, and Germany later in 2017 present.
“Populism has driven these elections to extremes,” Singer told RIA Channel. “Populism doesn’t stand for anything. It stands against the existing elite. So you have these big bi-polar outcomes.”
Singer highlighted to RIA Channel and IRIS that his team is finding opportunities in markets where there are geopolitical developments and downside risks that are compensated, including:
- European equity markets, such as Italy, Spain, and the United Kingdom
- Emerging market equities, mostly in South East Asia and India
- Emerging market currencies
On the other hand, they aren’t finding any opportunity in the U.S. equity market, and are currently short U.S. equities, which many investors view as a safe haven.
Singer went on to highlight in his RIA Channel interview that his team manages multi-asset portfolios, which can invest in about 125 global equity and bond markets, sectors, and currencies from a top-down perspective.
“It’s all about macro diversification,” Singer told IRIS’s Lydon. “We navigate in ways that often an advisor can’t by investing in individual countries and currencies.” He added that this approach provides “pure top-down analysis and pure top-down diversification executed in a dynamic manner.”