Genworth Financial has spun out an expanded investment platform that seeks to circumvent some of the difficulties in the global economy.
The new platform, which includes eight new strategies for investing, is indicative of the sense of uncertainty both clients and advisors are feeling about many traditional investments and reveals some alternative areas where the company’s team of specialists sees investment potential.
“That’s how the social fabric of this country is going to be lifted, by helping guide people through investments and disciplines and take off some of this emotional tax,” said Gurinder Ahluwalia, chief executive officer of Genworth Wealth Management.
To find that portfolio growth, Genworth has sought out some alternative areas for high risk-return possibilities. Strategists beefed up the share of emerging market corporate debt and other non-traditional investments in their approach.
“One of the advantages that investors do have right now is that because of the low-yield environment, there are places that you can still get income, such as high-yield corporate bonds, emerging market debt preferred stocks,” said Nathan Rowader, senior market strategist with Forward Funds. “And because of the low yield environment, volatility is low right now.”
For investors looking for modest long-term growth over short term income, Genworth looked to some more traditional areas of investment such as cash and even the U.S. Real Estate market, which has lately shown signs of improvement.
“We’re not afraid to tell our investors we’re sitting in cash today,” said Jeff Sherman, portfolio manager at DoubleLine capital. “Yes, it doesn’t yield much; It yields basis points, but it’s not negative.”
The one place that strategists cautioned against was the government bond market. Sherman pointed out that Dutch bonds had traded negatively for the past three years, so many investors, particularly on the institutional side, were in effect paying the government to hold onto their money, and in many cases trying to use bonds for a low risk strategy offered no guarantees.
“Bonds can go negative,” Sherman said. “There are irrational things out there, so don’t think that’s the bottom to this market.”
According to the company’s report, bond portfolios are dangerous because of their exposure to interest-rates and inflation.
“A bond solution may or may not taste good depending upon the yield you’re getting, but that concentrated approach may not be healthy for you,” said Ahluwalia.
All of the strategies are designed to be short term solutions to address the volatility, and strategists expected that market conditions would change and likely improve going forward requiring future adjustments.
“During periods of financial stress, we do suffer from a slightly larger drawback than the overall bond market, but as soon as that stress is removed or reduced, the market will make it all back up, plus. But through that path, we deliver higher income than the bond market.” said Rowader.
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