MAB Quarterly Review Q1 2025 - Cautious - Flipbook - Page 7
While we remain overweight the UK equity market and think it could prove to be an attractive source of
diversi昀椀ed returns in coming years, we also feel spoilt for choice in opportunities across the globe.
Fixed income
We remain neutral on our 昀椀xed income allocation, but retain a globally-diversi昀椀ed, high-quality bias throughout
our portfolio. This bias was very helpful over the course of the 昀椀rst quarter as economic concerns regarding
the new US administration’s tariff policy and government spending cuts sent interest rates on high-quality
bonds lower. The Bloomberg Global Aggregate Index of high-quality global bonds returned +1.2% over Q1.
High-quality bonds served their traditional diversifying function in multi-asset portfolios, via rallying during
times of equity market stress. This was particularly true of our long-dated US treasury Bonds over the quarter.
We think this dynamic could have a great deal of room to run, particularly if central banks are forced to cut
interest rates in the face of economic weakness.
Another helpful tailwind for our positioning was the sustained weakening we saw in the US Dollar. This was
very helpful for our exposure to Local Emerging Market Debt, which represents the bonds of developing
countries priced in their own currencies. Again, given the strength of the US dollar recently, this could have a
great deal of room to run in our view. We maintain a very strong preference for diversi昀椀ed exposure to global
bonds over UK gilts, which continued to underperform over the quarter and offer much weaker defensive
characteristics going forward, in our opinion.
Looking forward, we very much continue to favour a high-quality bias within our 昀椀xed income allocations
given the value on offer and the diversi昀椀cation bene昀椀ts they bring in the face of an uncertain economic
climate. We are however mindful that certain segments of the vast global 昀椀xed income universe are now
presenting attractive opportunities, and we are ready to exploit these in a way that maintains maximum
diversi昀椀cation within the portfolios.
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