Investment Strategies

Rothschild Continues To Warm To Equities, Likes Hedge Funds, Gold

Tom Burroughes Group Editor London 6 January 2011

Rothschild Continues To Warm To Equities, Likes Hedge Funds, Gold

Rothschild Private Banking & Trust has switched from its mildly negative to a neutral stance on equities, convinced that the outlook for stocks is brightening, while it is also positioning to deal with the risks of rising inflation.

“We expect the modest economic recovery to continue and have been increasing our exposure to equities and commodities over the past three months. However, we are concerned at the growing sense of complacency among investors: the recovery now seems to be taken for granted,” said the bank, in a note from Dirk Wiedmann, head of investments and chief investment officer.

The bank said the “outlook for equities continues to improve”, arguing that valuations are still relatively attractive while company profits should continue to rise, making stocks appealing compared with many other asset classes.

On hedge funds, RPBT has an overweight stance, arguing that “more normal correlations between and within asset classes” will work in the favour of most hedge fund strategies in 2011. The bank is also overweight commodities and gold, stating that the inflationary policies of central banks will buoy such assets, while many paper currencies are vulnerable.

As far as property is concerned, the bank is underweight, concerned that in the short run at least, the market will struggle, particularly in debt-laden countries.

RPBT also remains negative towards government bonds and expects yields to drift higher during 2011 amid continued concerns about the scale of public debt in the eurozone and the US.

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