Asset Allocator recently caught up with Ben Gilbert who runs the model portfolio service at £20bn outfit Sarasin and Partners. 

Gilbert revealed he is feeling quite positive about equities right now, as he believes the global economy has “weathered” higher interest rates quite well with nominal GDP growth strong and company earnings robust.

When building the equity book, the folks at Sarasin start with five themes: digitalisation, automation, ageing populations, climate change and consumption. 

Those are accessed through a combination of direct equity investments and allocations to funds. 

Sarasin's overweight to equities is funded through a slight underweight to fixed income. 

Gilbert is confident bonds have been restored to what he feels is their traditional role as a diversifier within portfolios. As a result he has tilted the fixed income allocation towards longer duration assets, as these would be expected to perform well if rates are cut to stimulate economies, a scenario which would be expected to be negative for the equity allocation.

With an overweight to equities and a material allocation to fixed income, it is the alternatives bucket that has been reduced materially.

Gilbert says that with the “transparent” returns available from bonds right now, particularly at the current yield levels, he sees no need to allocate to areas such as hedge funds where the returns are less certain. 

Among the areas where Gilbert is particularly keen to rely on external managers is small cap equities, with allocations to third parties only happening if they feel they don’t have the in-house expertise required in a particular asset class.