Private bank also adds emerging market debt to its bond portfolio

Press release -

ABN AMRO MeesPierson has decided to take some of the profits from its significantly overweight position in equities. ABN AMRO’s private bank will downgrade the position in favour of cash, despite the outlook that indicates that the global economy will grow and corporate earnings will remain strong. By taking these profits, ABN AMRO MeesPierson is anticipating the possibility of increased risks (in particular geopolitical risks) and a downturn in market sentiment caused by disappointment. The private bank has also added emerging market debt to its bond portfolio.

ABN AMRO MeesPierson’s Head of Investment Strategy Ben Steinebach explains, “The somewhat euphoric sentiment currently dominating the stock markets is liable to turn sour very quickly. At the same time, investors have largely ignored the risks (predominantly geopolitical risks) that exist in the world today. Although events so far have justified this inattention, the circumstances underlying the risks are liable to deteriorate, and by then it will likely be too late to change our policy. Nevertheless, we will retain our overweight position in equities and leave the composition of the equities portfolio as it is.”

Europe and emerging markets as drivers

ABN AMRO MeesPierson remains overweight in Europe and emerging markets (emerging Asia, in particular). The private bank expects these regions to be the principal drivers of economic growth and increases in corporate earnings. This decision comes at the expense of the position in the United States, where the bank remains underweight. Although ABN AMRO MeesPierson expects the US economy to continue growing, it sees less opportunity for accelerated growth there than in Europe and emerging markets.

Emerging market debt

ABN AMRO MeesPierson expects bond interest rates to rise, if only marginally, in the quarters ahead, leading the private bank to retain its substantially underweight position in bonds. For a variety of reasons, including to spread its risks, the bank has added emerging market debt (i.e. government debt in emerging markets) to its bond portfolio. Steinebach continues, “Economic growth in these regions is at an early stage, and inflation is expected to remain low. Yields in this market segment have been excellent in recent times. Adding emerging market debt to our bond portfolio will increase our returns.” 

Opportunities for the corporate bond market

ABN AMRO MeesPierson also sees opportunities for additional returns in the corporate bond market. The private bank invests in bonds of highly-rated companies, as well as in high yields: bonds of more high-risk companies that yield higher returns. The existing positions will be retained.

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