One size does not fit all when making successful investment decisions, according research by Schroders' Investment Strategy Unit (ISU) into country v sector strategies.
According to ISU, investors should focus on identifying the relative importance of all sources of risk and return, including common country, sector and style impacts, as well as stock specific effects.
Justin Abercrombie, head of Schroders’ ISU added: Clearly, sector and country impacts change dramatically over time. So far in 2001, the fragmentation of some global sector clusters has been an important trend and will be for the foreseeable future.
“The key to successful investing, therefore, is the ability to accurately identify emerging behaviour in global market returns in order to determine what new trends are developing.
According to ISU, global sector investing has grown recently, reflecting the rise in importance of their impact on portfolio risk and return. But country impacts, which used to be a more important common source of risk and return, are now reappearing in certain areas again, adds the unit.
These include UK tech stocks showing signs of behaving differently to global techs; US telecoms stocks outperforming their European peers; and the persistence of the “Japanese effect” - whereby some Japanese stocks behave more similarly to each other than to global sector stocks.
By Madhu Kalia
This week's edition of Professional Pensions is out now.
The government is in talks with the UK and Irish pensions regulators over how to protect members of cross-border schemes in the event of a no-deal Brexit.
The equalisation of guaranteed minimum pensions (GMPs) is at least two years away from being completed, and could take longer than four years for some schemes, a poll has found.
The Pensions Regulator will consider if schemes should be required to have professional trustees and assess the case for greater regulation of administrators and system providers, PP can reveal.