Matthew Merritt, head of strategy at Insight Investment, delivered a presentation on the theme Broadening Investment Horizons, during a seminar for customers organised by Bank of Valletta. His presentation focused on advice for investing in markets.
Mr Merritt explained how important it is for investors to resist investor amnesia. “Investors should not confuse luck and skill when it comes to investing,” said Mr Merritt. He explained that an investment portfolio should be diversified depending on the investor’s objectives. “Portfolio diversification can be attained by not only investing in different asset classes including equities, bonds, cash, property and multi-asset funds but also by investing in different regions. Insight Investment offers equity funds, bond funds, balanced funds and total return funds covering all the major markets and geographic regions. Insight also offers cash funds which are available in most major currencies,” Mr Merritt added.
During his presentation, Mr Merritt also provided information on the performance of the UK equity market during 2004. He said “the strong performance was due to investors becoming more encouraged by the apparent economic strength and positive corporate results. The latter emerged as a result of firms benefiting from cost cutting which was conducted during the previous period of economic weakness”.
The UK economy also strengthened as a result of the Bank of England raising interest rates in a timely manner to counter the threat of inflation. Meanwhile European markets rallied with equities benefiting from positive economic data and a renewed appetite for risk from investors due to clear signs of increased corporate profitability. Mr Meritt added that, at present, global real bond yields are well below historic norms but it looks like these would now start to move higher, particularly in the US. Overall, in 2004, equities performed better than bonds.
Mr Merritt added that “although we have one global economy, this is driven by two locomotives, the US and China. Going forward, one should be aware of the possibility of further rises in US short term interest rates, which will have an impact on the global economy being the lead economy. On the other hand, China, being the marginal driver of growth, is a powerful force of change”. He went on to say that “Insight predicts possible slowdowns in US, UK and Japanese economies with Europe’s GDP growth close to trend, this rated with inflation under control”.
Mr Meritt concluded that, overall, the environment is consistent with modest returns although the first signs of a shift in the investment regime are already present.
Matthew Merritt, who joined Insight Investment in September 2004, heads the strategy and allocation team focussing on strategic and tactical asset allocation decisions across a wide range of investment vehicles. The team helps formulate macro views and develops models to enhance Insight Investment’s asset allocation market capabilities.
Matthew Merritt began his career in 1989 at the Bank of England.
He has focused on strategy and asset allocation since 1993, running strategy teams at a number of investment banks.
Insight Investment is the fund management arm of HBOS plc, the seventh largest European Bank by market capitalisation.
Insight is a joint shareholder with the Bank of Valletta of Valletta Fund Management and is the investment advisor for the majority of Valletta Fund Management funds.