Allianz Equity Fund Invests Amid Uncertainty05.08.2012
While the global macroeconomic environment continues to bring uncertainty to the marketplace, Allianz’s NFJ Investment Group is building an equity portfolio to combat the volatility.
“The market is inefficient right now because it’s driven by emotion,” said Ben Fischer, managing director and portfolio manager with asset manager Allianz Global Investor’s NFJ Investment Group. “The weak spot in the market is the tendency for people to buy high and sell low amid the volatility. As the markets are now dominated by high-frequency traders, that has exacerbated the volatility.”
Investors have fled equities and headed into fixed income instruments in droves as the markets have stumbled. However, the markets have been on a steady rally over the last two quarters, in which they have collectively risen about 10% during each three-month period. One would think that confidence has returned to the markets and that investors would return to equities, but that has not yet been the case.
Estimated inflows for the 50 largest exchange-traded funds by assets under management saw a net inflow of 11.4% to fixed income exchange-traded funds versus a net inflow of 2.5% to equity ETFs, according to data provider Morningstar.
“In these market conditions, there is an emphasis on creating a portfolio that can replicate a pension fund and offset inflation,” said Josh Peters, managing director and portfolio manager with Allianz’s NFJ Investment Group. “Investors are looking for a paycheck from their portfolio.”
Bonds, though, have been perceived recently as a much safer investment than most other asset classes, particularly those issued by governments or municipalities.
“It’s clear after the volatile equities markets of the past decade, that there’s much more emphasis, especially on the retail level, to have a diversified portfolio which includes greater exposure to fixed income,” said Peter Campfield, president of BondDesk Trading, a fixed income technology firm.
However, while bonds can provide a steady stream of income, yields are currently at historic lows. With the investment strategy at NFJ being to invest in stocks that have a healthy dividend yield as well as solid fundamentals, it hopes to provide the best of both worlds. In addition, unlike bonds, stock prices can rise over time, which further boosts the investment.
“We’ve already gone through the worst of this economic crisis in 2008,” said Fischer. “We’re now going into a period of high inflation, which is a good time for dividend investing.”
Dallas-based NFJ Investment Group was founded in 1989, and is focused exclusively on dividend-paying stock strategies.