MAB Quarterly Review Q1 2026 - Cautious - Flipbook - Page 8
Market outlook
As a reminder, each of the Multi-Asset Blend Funds has a distinct long-term
Strategic Asset Allocation that is speci昀椀cally formulated based upon each Fund’s
stated risk pro昀椀le. The higher the risk pro昀椀le selected, the more is allocated to
equities and the less to diversi昀椀ers such as bonds, real assets or absolute return
strategies. Around that strategic asset allocation, we implement tactical tilts
when we observe highly attractive return opportunities where we believe the
risk-reward is strongly in our favour.
Equities
At the end of February, after a strong period of
performance from UK equities that led to UK equity
market valuations expanding beyond their historical
averages, we removed our modest overweighting
to UK equities, returning to our Strategic Asset
Allocation weight. We remain overweight Japanese
equities, a market which we believe offers exposure
to transformative structural reforms, funding that
overweight with an underweight to Continental
European equities.
Your Fund is spread across six equity regions
comprising the UK, US, Global, Continental Europe,
Emerging Markets and Japan. Unlike many portfolios
that are heavily concentrated in the US simply
because it dominates global indices, we deliberately
maintain a broader regional spread. We believe
this reduces risk and increases the chances of more
consistent long-term returns.
Within each regional equity allocation, we blend
both passive and active equity approaches and,
within the actively managed components, we also
ensure to have a carefully constructed blend of
different investment styles. We utilise our lengthy
investment experience as well as a number of
proprietary, internally developed quantitative
systems to help us with this blending process.
This is a critically important part of how we
construct portfolios because investment styles can
come in and out of favour over a market cycle and
the prevailing investment style can change at the
drop of a hat.
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For example, back in the dot-com bubble from
1995 to 2000, investing in technology, media
and telecom companies was in vogue and many
businesses in these sectors saw their share prices
bid up to unprecedented levels. At the same time,
more “value-oriented” investment styles focused
on selecting companies based upon a sensible
valuation of their assets and pro昀椀t streams were
completely sidelined. Managers investing utilising
a value style underperformed market indices by
an uncomfortably wide margin, and articles were
aplenty on why “value investing” was dead. Some
very experienced value-oriented fund managers
who had been successful investors for multiple
decades came under great pressure and in some
cases, their employers cracked, and the fund
managers lost their jobs, just before the dot-com
bubble burst and the value investing style returned
to the fore.
In more recent decades, many managers adopting
what is known as a “quality” investment style had
been extremely successful in outperforming their
relevant market benchmarks for a prolonged
period. These managers, who seek to invest
in well-managed, 昀椀nancially strong, relatively
predictable but steadily growing companies with
sustainable competitive advantages, had in many
cases performed extremely well for over a decade.
However, over the last two years these strategies
have fallen hugely out of favour globally, in some
cases as the underlying quality companies had
become relatively expensive for their more modest
levels of growth, in some cases as the market has
