Our positioning: Realizing gains on real estate investments

The markets seem to have factored in the end of the pandemic to a large extent. This means that neutral equity market positioning and the realization of gains on listed real estate funds is advisable.

The financial markets have been focusing on the end of the coronavirus pandemic over the past six months. The markets have been anticipating that fears over the pandemic will subside and that everyday life will finally return to normal for consumers and producers. The economic data not only confirmed these expectations, but regularly exceeded them.

As a result, the prices of growth-sensitive assets – such as equities, commodities and corporate bonds – have risen sharply over recent months. In contrast, defensive assets – gold, secure bonds and the Swiss franc – have tumbled in value. Defensive assets usually rise in value when investors are anxious and equity prices begin to falter.

New driving forces sought

The strong impetus produced by the prospect of the pandemic coming to an end now appears to be slowly petering out. Prices generally seem to have factored in a return to normality. The strong business figures for the first quarter of 2021 do not come as a surprise anymore. Equities have no longer been attractively priced for some time. With few exceptions, the prices of all the major leading indexes have recovered to pre-coronavirus levels. New record highs were reached in many places over recent weeks – including in Switzerland. The broad-based Swiss Performance Index (SPI) exceeded the 14,000-point mark for the first time in April.

It is as though stock markets are playing tug of war during these market phases.

New driving forces will emerge on the stock markets over the coming weeks and months. It is as though stock markets are playing tug of war during these market phases: forces are pulling on both sides, sometimes no clear trend emerges and there are rapid and frequent changes of direction. Experience shows that the best approach during such market phases is to stick to your strategy and not assume any major risks.

This is why we are maintaining neutral equity market positioning. Our regional preferences for equities also remain unchanged. In our view, US and UK equities offer greater potential for gains than Japanese and European securities over the short term. We believe we can build on the gains this positioning has produced over recent weeks.

Prices of real estate investments reach record highs

In contrast, we are realizing the gains made on Swiss real estate investments. In light of rapid price rises over recent weeks, we are reducing the weighting in the portfolios entrusted to us to below the strategy allocation. Prices of listed real estate funds have risen by around 7 percent in less than a month. That is more than the average annual return yielded by this asset class. The premiums indicate how high the prices now are. Owing to easy tradeability, investors usually pay a premium for these investments. This means that the prices are normally higher than the value of the properties contained in the fund. Investors are currently paying a premium of 45 percent on average. However, we believe that a premium of only around 30 percent is justified. This means that realizing gains is the best option in our view.

Performance of asset classes

Currencies1 month in CHFYTD in CHF1 month in LCYTD in LC
Currencies
EUR
1 month in CHF
-0.3%
YTD Year–to–date: since the start of the year in CHF

2.1%

1 month in LC Local currency
-0.3%
YTD Year–to–date: since the start of the year in LC Local currency
2.1%
Currencies
USD
1 month in CHF
-0.6%
YTD Year–to–date: since the start of the year in CHF
4.2%
1 month in LC Local currency
-0.6%
YTD Year–to–date: since the start of the year in LC Local currency
4.2%
Currencies
JPY
1 month in CHF
-0.2%
YTD Year–to–date: since the start of the year in CHF
-1.0%
1 month in LC Local currency
-0.2%
YTD Year–to–date: since the start of the year in LC Local currency
-1.0%

Equities1 month in CHFYTD in CHF
1 month in LCYTD in LC
Equities
Switzerland
1 month in CHF
4.6%
YTD Year–to–date: since the start of the year in CHF
7.3%
1 month in LC Local currency

4.6%

YTD Year–to–date: since the start of the year in LC Local currency
7.3%
Equities
World
1 month in CHF
3.8%
YTD Year–to–date: since the start of the year in CHF
14.7%
1 month in LC Local currency
4.4%
YTD Year–to–date: since the start of the year in LC Local currency
10.1%
Equities
USA
1 month in CHF
4.5%
YTD Year–to–date: since the start of the year in CHF
15.6%
1 month in LC Local currency
5.1%
YTD Year–to–date: since the start of the year in LC Local currency
10.9%
Equities
Eurozone
1 month in CHF
3.6%
YTD Year–to–date: since the start of the year in CHF
13.4%
1 month in LC Local currency
3.9%
YTD Year–to–date: since the start of the year in LC Local currency
11.1%
Equities
United Kingdom
1 month in CHF
2.5%
YTD Year–to–date: since the start of the year in CHF
15.1%
1 month in LC Local currency
4.0%
YTD Year–to–date: since the start of the year in LC Local currency
9.5%
Equities
Japan
1 month in CHF
0.2%
YTD Year–to–date: since the start of the year in CHF
8.1%
1 month in LC Local currency
0.4%
YTD Year–to–date: since the start of the year in LC Local currency
9.1%
Equities
Emerging markets
1 month in CHF
-0.4%
YTD Year–to–date: since the start of the year in CHF
8.7%
1 month in LC Local currency
0.2%
YTD Year–to–date: since the start of the year in LC Local currency
4.3%

Fixed income1 month in CHFYTD in CHF
1 month in LCYTD in LC
Fixed income
Switzerland
1 month in CHF
0.0%
YTD Year–to–date: since the start of the year in CHF
-1.1%
1 month in LC Local currency

0.0%

YTD Year–to–date: since the start of the year in LC Local currency
-1.1%
Fixed income
World
1 month in CHF
0.0%
YTD Year–to–date: since the start of the year in CHF
0.9%
1 month in LC Local currency
0.6%
YTD Year–to–date: since the start of the year in LC Local currency
-3.1%
Fixed income
Emerging markets
1 month in CHF
1.5%
YTD Year–to–date: since the start of the year in CHF
1.1%
1 month in LC Local currency
2.1%
YTD Year–to–date: since the start of the year in LC Local currency
-3.0%

Alternative investments1 month in CHFYTD in CHF
1 month in LCYTD in LC
Alternative investments
Swiss real estate
1 month in CHF
4.7%
YTD Year–to–date: since the start of the year in CHF
3.8%
1 month in LC Local currency

4.7%

YTD Year–to–date: since the start of the year in LC Local currency
3.8%
Alternative investments
Gold
1 month in CHF
1.3%
YTD Year–to–date: since the start of the year in CHF
-3.0%
1 month in LC Local currency
1.9%
YTD Year–to–date: since the start of the year in LC Local currency
-6.9%

Our positioning – Swiss focus

LiquidityTAA oldTAA new
Liquidity
CHF
TAA old Tactical asset allocation: short– to medium–term positioning
5.0%
TAA new Tactical asset allocation: short– to medium–term positioning
7.0%
Liquidity
JPY
TAA old Tactical asset allocation: short– to medium–term positioning
2.0%
TAA new Tactical asset allocation: short– to medium–term positioning
2.0%
Liquidity
Total
TAA old Tactical asset allocation: short– to medium–term positioning
7.0%
TAA new Tactical asset allocation: short– to medium–term positioning
9.0%

Equities
TAA oldTAA new
Equities
Switzerland
TAA old Tactical asset allocation: short– to medium–term positioning
26.0%
TAA new Tactical asset allocation: short– to medium–term positioning
26.0%
Equities
USA
TAA old Tactical asset allocation: short– to medium–term positioning
10.0%
TAA new Tactical asset allocation: short– to medium–term positioning
10.0%
Equities
Eurozone
TAA old Tactical asset allocation: short– to medium–term positioning
3.0%
TAA new Tactical asset allocation: short– to medium–term positioning
3.0%
Equities
United Kingdom
TAA old Tactical asset allocation: short– to medium–term positioning
4.0%
TAA new Tactical asset allocation: short– to medium–term positioning
4.0%
Equities
Japan
TAA old Tactical asset allocation: short– to medium–term positioning
0.0%
TAA new Tactical asset allocation: short– to medium–term positioning
0.0%
Equities
Emerging markets
TAA old Tactical asset allocation: short– to medium–term positioning
5.0%
TAA new Tactical asset allocation: short– to medium–term positioning
5.0%
Equities
China
TAA old Tactical asset allocation: short– to medium–term positioning
0.0%
TAA new Tactical asset allocation: short– to medium–term positioning
0.0%
Equities
Total
TAA old Tactical asset allocation: short– to medium–term positioning
48.0%
TAA new Tactical asset allocation: short– to medium–term positioning
48.0%

Fixed incomeTAA oldTAA new
Fixed income
Switzerland
TAA old Tactical asset allocation: short– to medium–term positioning
19.0%
TAA new Tactical asset allocation: short– to medium–term positioning
19.0%
Fixed income
World
TAA old Tactical asset allocation: short– to medium–term positioning
10.0%
TAA new Tactical asset allocation: short– to medium–term positioning
10.0%
Fixed income
Emerging markets
TAA old Tactical asset allocation: short– to medium–term positioning
6.0%
TAA new Tactical asset allocation: short– to medium–term positioning
6.0%
Fixed income
Total
TAA old Tactical asset allocation: short– to medium–term positioning
35.0%
TAA new Tactical asset allocation: short– to medium–term positioning
35.0%

Alternative investmentsTAA oldTAA new
Alternative investments
Swiss real estate
TAA old Tactical asset allocation: short– to medium–term positioning
5.0%
TAA new Tactical asset allocation: short– to medium–term positioning
3.0%
Alternative investments
Gold
TAA old Tactical asset allocation: short– to medium–term positioning
5.0%
TAA new Tactical asset allocation: short– to medium–term positioning
5.0%
Alternative investments
Total
TAA old Tactical asset allocation: short– to medium–term positioning
10.0%
TAA new Tactical asset allocation: short– to medium–term positioning
8.0%
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