Ahead of the upcoming press conferences being held by both the European Central Bank and the US Federal Reserve this Thursday and Friday, Jeff Keen of Waverton Investment Management gives his perspective on quantitative easing for investors:
“Back in 2009, talk that the Federal Reserve would need to carry out $5 trillion of Quantitative Easing (QE) was considered as wild speculation.
“Now Central Banks globally have expanded their balance sheets by $16 trillion. Even with the US Federal Reserve announcing the end of QE (except for the reinvestment of coupons), new announcements from the ECB and the Bank of Japan suggest that the overall figure will continue to rise.
“Whilst this extends the period of extraordinary monetary stimulus and prolongs the period during which the financial markets are distorted by these huge interventions, it also underlines the commitment of Central Banks to avert the threat of deflation and raises confidence that the global economic recovery will continue.
“Following the increase in stimulus announced by the Bank of Japan last week, the pressure will be on the ECB to ensure that deflation does not take hold in Europe and the very low level of inflation expectations gives Draghi the mandate to move more aggressively.
“Financial markets continue to project a much shallower path for US interest rates than that indicated by the Federal Reserve. We think this is symptomatic of a general complacency towards the potential for higher rates over time. In our view, just a slightly more optimistic view of the global economy, or perhaps less focus on deflation risk, could lead to a much higher level of expectations for interest rates across the developed world. This would represent a major headwind for the fixed income asset class and therefore we recommend a highly strategic approach to this part of clients’ portfolios.
“The macro-economic environment is a complex one but we remain biased towards risk assets.”
By Jeff Keen, Head of Asset Allocation
Jeff Keen joined the company as a Director and co-head of Fixed Income in June 2009. He is Chairman of the Asset Allocation Committee and is the lead manager of the Waverton Global Fund and the Waverton Sterling Bond Fund. After graduation from Bristol University in 1984 he joined the Colonial Mutual (which became First State) and whilst there he managed funds across a range of asset classes before becoming Head of UK Equities. In 1999 he moved to TriAlpha Investment Advisors and was CIO and Chairman of the Asset Allocation committee as well as lead manager on their global bond mandates including the TriAlpha International Bond Fund.
Waverton is a discretionary investment management boutique dedicated to providing high quality investment outcomes and bespoke client service for private individuals, trusts, charities, and institutions.
The total headcount of the firm today stands at over 100 members of staff, of which a quarter are portfolio managers with direct client relationship responsibilities. We pride ourselves upon our internal controls, comprehensive in-house administrative operations and personalised client service. The firm is located in one office in St James’s Square, in the West End of London. As at 30th September 2014, Waverton had approximately £5.2 billion of assets under management.
All clients deal directly with their portfolio managers not relationship managers.