Institutional
This site is intended for Institutional or Qualified Investors only – not for public audience.
This is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation.
Information contained on this website is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
Sub-Advised
NOT FDIC INSURED ‖ MAY LOSE VALUE ‖ NO BANK GUARANTEE
The information contained in the website is intended for U.S residents only.
The information contained on this website does not constitute investment advice or a recommendation to purchase or sell any securities or other financial instrument or any particular strategy or fund. Market commentary, product information and related performance data available on this website has been compiled from sources believed to be reliable and is provided in good faith for informational purposes only. The content on this website is intended for institutional investors and their financial representatives only, and should not be relied upon by or distributed to retail investors or members of the general public in any jurisdiction.
Investments involve risks, are not guaranteed and may not return the original principal amount invested. Past performance is no guarantee of future results. Investors should read all available product information carefully before making an investment decision, including information about applicable risks, fees and expenses.
It's all about the sectors
As economies and central banks around the world move in lock-step capital allocation by sector – rather than region – should prove a more effective investment strategy.
Written by
Andrew Cole, Head of Multi Asset London
Which economy will grow faster this year: the euro zone or the US? Which central bank will surprise markets the most? Fund managers spend a lot of time debating these issues and their implications for asset classes in different regions.
But in fact, there hasn’t been much divergence in economic and monetary cycles for some time. As a result, differentiating between countries hasn’t really helped drive investment performance, with share price moves dictated more by individual companies’ earnings.
In this environment, we believe there are much better opportunities for alpha generation to be had from looking at asset allocation by global sector rather than by region. Both our market analysis and the attribution of our own portfolio returns support this view.
The average 12-week dispersion of returns within the MSCI All-Country World Index – the extent to which returns differ from the mean – shows that stocks are behaving more according to which sector they are in, on a global basis, rather than to which country or region (see chart). Indeed, this trend has been in place for much of the past three years.
Furthermore, the quarterly rolling correlation of share price returns among different regions is hovering around its long-term average. Correlation between sectors, in contrast, has been heading lower and now stands at just 52 per cent – meaning sector indices move in tandem with each other only around half the time – versus the long run average of 69 per cent.
relative importance
Dispersion of returns among industry sectors compared to return dispersion of regional equity markets, expressed as ratio
Source: Pictet Asset Management, Datastream. Data covering period: 02.07.1998 – 14.06.2018, using constituents of MSCI All Countries World Index, 12-week average
So, if sectors are the way to go, the next question is which ones to pick? We believe energy and materials currently offer attractive opportunities. We also like technology for the long-term growth potential, particularly in robotics and the digital economy. Conversely, we are fairly cautious on utilities.
Of course, economic and policy divergences may yet re-emerge. In the US, for example, there is support for Reagan-style supply side reform: lowering taxes in a bid to increase total budget revenues. It is hard to see such policies being passed in Europe, where strict EU rules necessitate greater control over public debt. The rise of populism can play a part in triggering divergences as populist parties are more likely to follow non-conventional agenda or focus on domestic priorities. That would lead to greater dispersion of returns and lower correlations in the performance of their respective stock markets.
For today though, sectors are in the ascendancy, and active managers have the opportunity to use this in asset allocation decisions to maximise returns.
more from the multi asset team
America's Road Runner economy
Patrick Zweifel, Chief Economist, Steve Donzé, Senior Macro Strategist
June 2018
Dissecting the cost of trade war
March 2018
Corporate borrowing: cause for caution?
Supriya Menon, Senior Multi Asset Strategist
June 2018
Important legal information
This marketing document is issued by Pictet Asset Management. It is neither directed to, nor intended for distribution or use by any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, the KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet.
This document is used for informational purposes only and does not constitute, on Pictet Asset Management part, an offer to buy or sell solicitation or investment advice. It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. The effective evolution of the economic variables and values of the financial markets could be significantly different from the indications communicated in this document.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.
The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.
Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or for any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.
EU countries: the relevant entity is Pictet Asset Management (Europe) S.A., 15, avenue J. F. Kennedy, L-1855 Luxembourg
Switzerland: the relevant entity is Pictet Asset Management SA , 60 Route des Acacias – 1211 Geneva 73
Hong Kong: this material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.
Singapore: this material is issued by Pictet Asset Management (Singapore) Pte Ltd. This material is intended only for institutional and accredited investors and it has not been reviewed by the Monetary Authority of Singapore.
For Australian investors, Pictet Asset Management Limited (ARBN 121 228 957) is exempt from the requirement to hold an Australian financial services license, under the Corporations Act 2001.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).
In Canada Pictet AM Inc. is registered as Portfolio Manager authorised to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.