The research firm found that investors had short-term concerns over equity exposure, but also recognised that fixed interest could not provide them with an adequate income.
“We see in our business that many financial advisers and their clients are still particularly sensitive to any further volatility in shares four years after the onset of the global financial crisis,” van Eyk’s head of manager research and deputy chief investment officer Matthew Olsen said.
With the cash rate at a record low of 2.75 per cent and low bond yields, this concern is only likely to intensify.
“No matter which scenerio we model, we still get the lowest allocation to bonds …We are very underweight in bonds and the bonds we are in are low duration …[and] we feel investors should be quite wary of fixed interest exposure at the moment,” Mr Olsen told InvestorDaily.
van Eyk sees absolute equities asset class as an option for investors who have concerns about direct equity exposure.
“Absolute Equities have matured significantly as an asset class in Australia in the last five years and van Eyk’s highly rated managers in this sector have been producing healthy, positive absolute returns,” Mr Olsen said.
van Eyk believes absolute equities can give investors the gains of the share market without the high levels of market change.
“Absolute equities, market neutral equities, delivered 10 to 12 per cent returns with the volatility of only around six per cent, so it is kind of like bond volatility [and] much lower than equity market volatility,” Mr Olsen said.
Absolute Equities come under the umbrella of van Eyk’s “alternative” investments and the research firm recommends exposure to them as part of a well diversified portfolio.
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