Specialised Investments Simplified: October Edition

Welcome to the October edition of Specialised Investments Simplified! As the year winds down, now is an ideal time to assess new opportunities that could benefit your clients’ portfolios. This month, we’re diving into the potential of US mid-cap equities, exploring the strategic advantages of real estate debt, and examining the factors behind gold’s recent performance. Each of these investment themes offers potential avenues for adding value to your clients’ strategies, and we’re here to break down how.?

US Mid-Cap Market: A Potential Opportunity for Client Portfolios?

With US mid-cap stocks trading at significant valuation discounts compared to large caps, now might be an opportune time for financial planners to consider adding exposure to this segment. Bob Kaynor, manager of the Schroder US Mid Cap fund, recently shared insights on why these companies—often referred to as the “heartbeat of the US economy”—are poised for growth. Given the current market environment, mid-caps offer a compelling blend of value and potential upside for client portfolios.?

Key Considerations for Financial Planners:?

• Valuation Entry Point: Mid-caps are currently trading at a 15-20% discount to the S&P 500, offering a lower entry point at a time when earnings growth is expected to accelerate. This could serve as a tactical allocation to enhance portfolio returns.?

• Economic Sensitivity: Mid-cap companies derive around 84% of their revenues from the US, making them more directly impacted by domestic economic conditions. With fiscal stimulus on the rise, this sector may provide clients with targeted growth exposure.?

• Risk Management: While mid-caps can bring additional volatility, the current discount in valuations may help mitigate some downside risk. This presents an opportunity to balance growth potential with risk management across your client base.?

For planners looking to diversify clients' equity exposure or tap into US economic growth, mid-caps could be a valuable addition to portfolio strategy.?

Listen to Bob Kaynor's Interview on Mid-Cap Opportunities

Real Estate Debt: A Strategic Diversification Tool?

Real estate debt can offer an attractive risk/return profile for clients seeking income without the responsibilities of direct property ownership. For financial planners, this asset class allows for tailored strategies that align with clients' financial goals, risk tolerance, and time horizons.?

Why Financial Planners Should Consider Real Estate Debt:?

• Enhanced Income Potential: Investing in real estate debt allows clients to earn steady income through interest payments, which may offer a more predictable cash flow than traditional equities or direct property investments.?

• Risk Mitigation: Real estate debt can help diversify client portfolios, providing lower correlation with other asset classes. This can be particularly valuable during periods of market volatility.?

• Accessible and Flexible: The ASK model enables a tailored approach that suits clients with varying levels of risk aversion. For clients concerned with managing real estate directly, this option presents a lower-maintenance, time-efficient alternative.?

Incorporating real estate debt into a client’s strategy could be a savvy way to achieve diversification while still tapping into the property market’s potential returns.?

Gold's Rally: What It Means for Portfolio Hedging?

Gold has gained 4.6% in September alone, driven by a weaker dollar and ongoing geopolitical tensions. For financial planners, gold remains a classic hedge against market uncertainty, with its role in portfolios serving as a buffer against volatility and economic downturns.?

How to Position Gold in Client Portfolios:?

• As a Hedge Against Inflation and Uncertainty: Given the recent Fed rate cuts and rising geopolitical risks, gold can act as a safe-haven asset to protect against downside risks in other markets.?

• Diversification Benefit: Gold typically has a low correlation with traditional equities and bonds, making it an effective component for reducing overall portfolio risk.?

• Liquidity Considerations: Gold-backed ETFs can provide liquidity and flexibility, making it easier for financial planners to make tactical adjustments as market conditions evolve.?

• Gold's continued rally underscores its strategic importance in comprehensive portfolio management, especially as global uncertainties persist.?

Looking Ahead?

With the final quarter of the year underway, now is the time to reassess client strategies and explore new avenues for growth and risk management. Whether it’s considering mid-cap equities for value opportunities, real estate debt for income generation, or gold as a protective hedge, this edition provides actionable insights to guide your planning.?

Thank you for reading the October edition of Specialised Investments Simplified. We aim to support you in navigating the evolving investment landscape and achieving your clients' goals. For deeper insights, check out the links below.?

Stay informed and keep empowering your clients to make the most of market opportunities. See you in the next edition!?

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