Raf Choudhury

Global asset manager abrdn has announced it has hired an Investment Director to further strengthen its Australian Multi-Asset Investment Solutions (MAIS) offering for wholesale and institutional investors, financial advice groups and investment platforms.

abrdn has appointed Raf Choudhury to the newly created position where he will play a leading role in managing abrdn’s Australian multi asset funds (including the Multi-Asset Real Return Fund and Multi-Asset Income Fund) and its rapidly growing managed accounts capability. Raf will report to Irene Goh, Head of Multi-Asset Investment Solutions – Asia Pacific, and will be an important member of abrdn’s Asia-Pacific and Global MAIS teams.

Choudhury joins abrdn from State Street Global Advisors where he held a range of portfolio manager roles over a 17-year period in both the UK and Australia, and most recently was State Street’s Head of Investment Strategy & Research – Australia.

Irene Goh, Head of Multi-Asset Investment Solutions – Asia Pacific, abrdn, said: “We are extremely pleased to have Raf onboard to further our successes in Asia Pacific. This signifies our commitment to the business and clients in Australia with Raf driving the growth of abrdn’s multi asset investment capability locally. He will assume the portfolio lead for the Australian-based portfolios and managed accounts.

“The breadth of abrdn’s investment platform across public, alternative and private markets, coupled with digital, sustainability and investment solutions capabilities anchors our ability to provide customised cross-asset solutions to meet clients’ complex needs today. Raf will be instrumental in bringing these to the doorstep of our Australian clients and the investing community. We look forward to partnering with our clients in addressing their challenges.

“A key element of Raf’s responsibilities will also be contributing investment insights to the broader MAIS teams that should translate into successful portfolio strategies. With his experience, we look to Raf delivering valuable and sophisticated analytical research as well as investment strategies to the regional and global investment network. ”

Brett Jollie, Managing Director – Australia, abrdn, added: “This new role is a great example of abrdn investing in the Australian business. We have listened to our clients and acted to meet their needs.

“While Raf will be the Multi Asset business’ point person here in Australia, he will be backed by our large global team of more than 100 MAIS professionals who manage more than AU$83billion (US$61billion) in multi-asset investment strategies.

“Raf will also play an integral role in the development and further growth of our managed account capability. abrdn Australia currently has a suite of over 20 separately managed account solutions for financial advice licensees and advisers to tap into, and is a core growth pillar for the Australian business.”

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Raf Choudhury

“The big talking point in the market at the moment is inflation. Over the last 40 years inflation has been generally contained within or below the targets we have seen set by central banks but recent signs point to higher levels of inflation around the world.”

“There are additional pressures as well. In March, US President Joe Biden signed a US$1.9tn economic relief bill that saw the government send US$1,400 cheques to most Americans. With increased levels of savings through the pandemic, consumers are itching to get out and be able to enjoy some retail therapy.”

“Long-term bond yields are up and have been on the rise since the start of the year with the yields on the 10 year bond in both the US and Australia having both risen by around 55bps.”

“Some argue that the current pick-up in inflation (the 12 month percentage change in the US consumer price index was around 5% as of the end of May), is transitory and point to events like the temporary closure of the Suez canal in March this year.”

“And it’s been commodities – often regarded as an inflation indicator as well as an inflation hedge – that have seen a rapid rise in prices over the last 12 months. Across-the-board, the rise in commodity prices to the highest levels since the start of the pandemic is creating increased cause for concern.”

“With the economic recovery underway, indications are now that we will see two rate rises by the end of 2023 but that is over a year away. In the interim, higher prices for raw materials will probably result in temporary inflation pressures and we expect to see inflation settle slightly higher than investors may be anticipating.”

Read the full commentary by Raf Choudhury – Head of Investment Strategy and Research.

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Raf Choudhury

The last 12 months have been ones of extreme change and adaption. Covid-19 changed the landscape on a number of fronts. Working from home became business as usual, social distancing became the norm and restrictions on travel both domestically and internationally took hold.

As well as dealing with the domestic and global implications of Covid-19, there were also a number of other significant changes that took place. One of those was the inauguration of a new U.S. President. After beating Donald Trump, Joe Biden became the 46th President of the United States of America. His inauguration on January 20th 2021 already seems like an age ago and April 30th will mark 100 days of his presidency.

Over that period, the progress of vaccine rollouts around the world have dominated headlines. The UK has begun mass vaccinations, while Europe has been struggling with supply issues. Some new vaccines have been approved while others have been temporarily paused. Case numbers are still increasing and side effects from the vaccines are becoming more apparent including more recently the risk of blood clotting. Domestically, the limited number of cases on our shores has afforded the Australian government time to take a more measured approach to rolling out the vaccine.

In the US, Biden announced a plan to have 100 million people vaccinated within his first 100 days. That target was actually met on the 19th March but with the lack of tweets, which was the primary communication medium adopted by his predecessor, you might think that Biden hasn’t really done a lot since coming into power.

In fact, he has quietly been going about implementing a number of changes (in particular to policies implemented by Trump). While it took Trump two weeks to sign his first eight executive orders, Biden signed 15 executive orders within the first 24 hours of his presidency.

There are three areas that Biden has targeted as being top priorities.

1. Stemming the human impact of Covid-19
2. Reviving the economy
3. Addressing the issue of climate change

Covid-19

Biden is well on track in his vaccination program. Over 100 million people have been vaccinated with shots continuing to be administered at a rate of 2.5 million vaccinations a day. This success is in part due to the boost in the federal response to the coronavirus crisis that was the first executive order he signed. While the priority remains vaccinating US citizens, the US is now in position to help supply both Canada and Mexico with vaccines.

Economy

A large part of the economic recovery rests on mass vaccinations which are well under way. But in the meantime, the economic stimulus proposal Biden released on January 14th is focused on helping to see the economy through the interim. In fact, investors were buoyed by the new US $2.3tn infrastructure spending plan and growing optimism about the economy. The latest highs in the US markets point to renewed confidence among investors that the economic recovery is gaining pace.

Climate

A key aspect of the platform that Biden ran on was climate change and this was reflected in the initial list of executive orders that he signed. These established climate considerations as an essential element of US foreign policy and national security and he set a target for the US to achieve a carbon pollution-free power sector by 2035. He also set a target for the US to reach a net-zero economy by 2050. At the same time, he re-joined the Paris Climate Agreement and rescinded the Keystone XL Pipeline permit as well as ordering federal agencies to reinstate environmental regulations his predecessor had rolled back.

Passing grade

As we roll up to 100 days of the Biden presidency, it would be easy to think that there has been little action from the new president but Biden and his administration have hit the ground running. As well as the above, he has also announced the withdrawal of all US troops from Afghanistan by September 11th . Whilst a focus of his administration is to restore international relationships, he is also showing he will not be a soft touch. He has imposed a number of sanctions on Russia in response to what the US says are cyber-attacks and other hostile acts. And China remains on the radar with the US having blacklisted seven Chinese groups it accuses of building supercomputers to help its military.

While some of his achievements thus far have garnered some headlines, Covid-19 is still the main issue that the world is contending with. Biden though has been quietly going about his work and in doing so has positioned the US to lead the way in the human and economic recovery from Covid-19.

By Raf Choudhury, Head of Investment Strategy & Research, Australia

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With midterm elections around the corner we may be entering a lame duck period.

With our overall asset class views still favouring growth assets driven by positive views in particular for US equities, the US midterms on November 6th have the potential to upset the apple cart.

However, with midterm elections just weeks away, our view is that we are entering a bit of a lame duck period in relation to policy.

The considerable political desire among Republicans to get agreement on NAFTA before the midterms looks to have been enough to get a deal passed, although the new trade deal still needs congress’s approval. With the tax cut already starting to fade away from the public’s memory, it was important for the Republicans to get a victory leading into the elections.

On the China trade issue, we believe there will be very little progress towards a resolution over the next several months. Given the disagreements between the US and China go to the heart of structural issues that will require time to reconcile, it is a pretty sure bet that tensions will remain high leading to the midterm elections. China has an incentive to stall talks for the time being while waiting to see how strongly positioned the US administration emerges from the elections. We expect the next couple months to be volatile, but maintain a constructive medium-term view. We believe that Trump has signaled a shift towards China and that the market has recognized the fact that things could get worse before they get better.

Meanwhile, European trade negotiations seem likely to progress but are highly unlikely to conclude before the midterm elections. Threats of a government shutdown have subsided lately and in any case the impact on actual government operations would have been minimized by passage of several stand-alone funding bills that warrant continued operations of various departments.

So what does that mean for investors?

As we go into the final stretch of the year, volatility will continue to surface its head and risks are hovering around. However, we expect investors to be left relatively unscathed and for investors that hold course, history shows potential for them to be rewarded, especially in Midterm years.

Portfolio Positioning and Performance¹

The end of the third quarter saw positive returns across most global equity markets although the local market lagged. Quarterly returns mimicked what had already transpired throughout much of 2018 with US economic leadership translating into strong earnings growth in the US with the market (MSCI US Net total return local) returning +0.4% in September and 7.4% over the third quarter, setting all-time highs along the way. This contrasts with other markets where this achievement continues to elude many other equity markets around the world. Locally, we saw a weak month with the S&P/ASX 200 Index down -1.3% for the month of September but was up over the quarter +1.5%. Other major markets however were up for the month with Japan (MSCI Japan Net total return local) up 5.5% and Europe (MSCI Europe Net total return local) up 0.3%. Emerging markets (MSCI EM Index Net total return local) however had a negative month, down 0.5% and was down -1.1% for the quarter. Local based fixed income returns saw negative returns in September after a positive August with Australian bond yields (3 and 10 year) rising by 7 and 15 basis points respectively. Our investments in Commodities and Emerging markets bonds contributed positively this month, up 3.3% and 2.1% respectively in September. Looking into our positioning across the portfolios for the month of September, on average, the Growth assets allocations have been approximately 68% for Builder, 47% for Sustainer and 40% for Provider. Our exposure preferences in September were again an overweight in global equities relative to fixed income. Performance wise, mixed results across asset classes saw the funds deliver a small negative return for September but are positive year to date.

By Raf Choudhury, Senior Investment Strategist

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1. Source: Bloomberg Finance L.P. SSGA. As at 28 September 2018. Past performance is not a reliable indicator of future performance. This information should not be considered a recommendation to buy or sell any security or sector shown. It is not known whether the securities or sectors shown will be profitable in the future.

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