The expert panel at the FPG conference this year has come up with what is describes as a "modestly defensive portfolio" which is aimed at producing a good yield.
The expert panel at the FPG conference this year has come up with what is describes as a "modestly defensive portfolio" which is aimed at producing a good yield.
The portfolio is designed by a seven-member "expert" committee following discussions on each of the various asset classes.
Asset allocation committee chairman Stephen Poloz says the 1999 portfolio is designed to give advisers and investors a steer on how to tilt portfolios for the coming 12 months.
He says with no big issues on the horizon, "there is no strong reason to go along way from the benchmark".
This year the benchmark has been revamped giving greater exposure to New Zealand assets.
Under the new benchmark 30 per cent of assets were allocated to New Zealand compared to 20 per cent last year.
Poloz says this change reflects investors' bias to the local market.
The key features of the committee's portfolio are that it is has more New Zealand assets than last year through both the benchmark changes and the tactical asset allocation decision. Locally the committee is overweight in property and cash and devoid of bonds.
Internationally the only overweight position is Australian bonds.
While the portfolio has a greater New Zealand emphasis the committee expressed some reservations about the outlook for the local market this year, and warned people not to be too optimistic.
The main concerns centred around the country's significant current account deficit, political uncertainty and weak commodity prices.
The tactical asset allocation presented by last year's committee performed poorly, relative to the committee's benchmark.
The benchmark portfolio returned a 24 per cent return in the 12 months ended December 31, while the tactical portfolio returned 19 per cent.
"The reality is we screwed up last year," committee member Girol Karacaoglu told the conference.
Much of the blame for the performance was the committee's decision to significantly underweight international equities. This was primarily due to the uncertainty flowing from the Asian economic crisis.
A full report on this year's asset allocation, plus the reasoning behind it will be in features tomorrow.
The expert panel at the FPG conference this year has come up with what is describes as a "modestly defensive portfolio" which is aimed at producing a good yield.