
Investment Directions
Fixed Income: Carry with quality
We focus globally on spread income in fixed income, rather than duration, given US fiscal policy and sticky inflation. Yet we still see opportunities in EUR rates and high yield (HY) as European Central Bank (ECB) rate cuts continue, and selectively in emerging market debt (EMD), amid US dollar strength and prospective tariffs.
Rates
We favour European government bonds (EGBs), gilts, and US mid-term bonds for solid yields. Consider fixed-maturity products to lock in current yields.
Seeking income in credit
We see opportunities in high-yield credit with strong fundamentals, favoring EUR HY over USD HY due to better valuations and ECB support amid policy uncertainty.
Emerging market debt
Emerging markets show strong fundamentals with attractive yields. We favour hard currency sovereign debt and active security selection in the current environment.
Our highest conviction ideas
Hello and welcome to The Short List: a roundup of our highest-conviction ideas for 2025 across equities, fixed income, portfolio diversifiers, and portfolio enhancers.
In equities, we double down on US stocks against a backdrop of US exceptionalism. We favour a building block approach, capturing the increasing breadth of earnings growth through exposure to the equal-weighted S&P 500 index, while sizing exposure to the S&P top 20 names depending on views on concentration. We take a selective, alpha-seeking approach to equities in the rest of the world, preferring to take company-level rather than broad market risk amid a more challenged macro outlook, for example in Europe.
In fixed income, we’re seeking carry with quality: we broadly lean towards higher-quality spread income in fixed income, rather than duration, given sticky inflation and potential US fiscal expansion. Yet we also see opportunities in euro rates and high yield credit as ECB rate cuts continue, as well as selective opportunities in EM debt, given dollar strength and prospective tariffs.
Meanwhile, less-reliable duration and higher volatility today make the case for careful diversification, in our view. We look beyond traditional asset classes to portfolio diversifiers. We think liquid alternatives can provide a way for investors to reduce broad market beta and replace it with uncorrelated alpha risk across asset classes. Scarce assets like Gold and digital currencies may also offer ‘old’ and ‘new’ ways to hedge inflation and geopolitical risks.
Finally, we look to enhance potential returns by building exposure to mega forces and private markets. We see upside from many of the mega forces transforming economies now and in future – particularly AI, where we look beyond early beneficiaries – but we get more selective as these structural forces start to be more appreciated by markets. We think the opportunity set is increasing in private markets and our analysis suggests that reconfiguring portfolios to include a mix of private assets could enhance risk-adjusted returns.
Thank you for joining, and please see our 2025 Investment Directions report for more on these exposures.
We favour a granular approach to US stocks, emphasising mega caps and the equal-weight index. Beyond the US, we focus on company-level risk for a selective equity approach.
We focus on spread income over duration in fixed income, with opportunities in EUR rates and HY credit. We prefer fixed-maturity products to lock in yields and favour higher-quality HY exposures.
Less-reliable duration and higher volatility support reducing broad beta. We use liquid alts, hedge with gold and digital assets, and focus on private markets to enhance returns.