Monthly Asset Allocation Update – February 2026

Transcript

Hi, I’m Matt Bance, and welcome to our February ‘26 asset allocation update. I’ll briefly outline how portfolios are positioned and highlight some of the key changes we’ve been making.

Firstly, starting with the overall shape of portfolios.

We continue to hold a modest overweight to risk assets, including equities. Over the past month, we’ve added to existing equity positions, and maintain higher than benchmark allocations in high yield and emerging market debt.

This reflects what we see as a supportive economic backdrop. Fiscal policy is helping to drive a re-acceleration in growth, manufacturing activity is recovering, and that should continue to support corporate earnings. We do recognise that valuations are elevated, and we expect ongoing geopolitical noise. But for us, that’s largely something to fade, not a reason to change the broader trend.

Second, we see attractive opportunities across emerging markets.

Within equities, we believe emerging markets are well positioned, benefiting from strong AI-related demand, their role as commodity producers in several key markets, and the prospect of a weaker dollar.

In fixed income, stronger currencies are helping to contain inflation, giving key central banks room to cut rates. This creates a supportive environment for EM local-currency bonds.

At the same time, we have rotated some exposure from global high yield into EM dollar-denominated debt.  All-in yields remain attractive, and spreads continue to offer a meaningful pick-up versus US corporate credit, especially in higher-yielding segments. Third, we have increased our overweight to small cap equities.

While there have been several false starts for small caps in recent years, we are now seeing a clear inflection in both trailing and forward earnings, which had been missing previously.

Importantly, the lagged effects of earlier policy easing are beginning to feed through, supporting manufacturing activity, and further expected rate cuts later this year should provide additional tailwinds.

Thanks very much for joining us, and we look forward to updating you again next month.