Despite market uncertainty, ETF opportunities exist across asset classes

Aug 14th, 2012 | By | Category: Alternatives / Multi-Asset

Despite the persisting European debt crisis, slowing growth in China, the coming US elections and other factors, investors who are able to look past the latest headlines and focus on the long term will be rewarded over time, according to a recent report from BNY Mellon Wealth Management.

Despite market uncertainty, ETF opportunities exist across asset classes

Opportunities exist across asset classes despite market uncertainty, says BNY Mellon Wealth Management.

“Investors can’t afford to be paralysed by turbulence and uncertainty in the global markets,” said Leo Grohowski, chief investment officer of BNY Mellon Wealth Management. “In this critical decade, investors need to be nimble to actively uncover investing opportunities rooted in solid fundamentals.”

The report, Summer 2012 Investment Insights, discusses the benefits of disciplined investing and avoiding moves in and out of the market in reaction to news of the day.

“Unfortunately investors who backed out of the equity market after the third quarter swoon in 2011, missed out on strong gains we saw through the end of March this year,” Grohowski said.

The report outlines potential opportunities within fixed income, equities and so-called diversifiers.

Within fixed income, BNY Mellon Wealth Management favours an underweight stance in US Treasuries and believes investors can find better income sources by diversifying across fixed income sectors, including investment grade corporate, emerging market and high-yield bonds.

Potential London-listed ETFs meeting these criteria include:

DB X-tracker iBoxx GBP Liquid Corporate 100 Index ETF (XG7C)
Pimco Short-Term High Yield Corporate Bond Index Source ETF (STHY)
SPDR Barclays Capital Euro High Yield Bond ETF (SYBJ)
iShares Morningstar $ Emerging Markets Corporate Bond ETF (EMCP)
Lyxor iBoxx $ Liquid Emerging Markets Sovereigns ETF (LEMB)

On equities, BNY Mellon Wealth Management argues that while the fundamentals remain strong, current global conditions are likely to heighten uncertainty over the next few quarters. It favours an overweight position in emerging market equities – despite a possible short-term pull back because of turmoil in Europe – based on attractive valuations and superior prospects for long-term growth.

Potential ETFs include:

Vanguard FTSE Emerging Markets ETF (VFEM)
Amundi ETF MSCI Emerging Markets (AUEM)
RBS Market Access DAXglobal BRIC Index ETF (BRDX)
PowerShares FTSE RAFI Emerging Markets ETF (PSRM)

On portfolio diversifiers, BNY Mellon Wealth Management says that lower-correlated strategies can offer ways to help reduce risk amid uncertainty and smooth portfolio volatility. It sees potential opportunities in long/short hedge funds, macro-driven funds and private equity.

Potential ETFs include:

UBS-ETF HFRX Global Hedge Fund (UC19)
iShares S&P Listed Private Equity ETF (IPRV)
PowerShares Global Listed Private Equity ETF (PSSP)

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