Morningstar IM's Kemp: 'Outstanding opportunities' found in value assets
Heightened risk levels behind interest
The heightened risk levels across markets mean now is the time to buy into value opportunities, according to Morningstar's Dan Kemp, who said it is "often easy to forget that the purpose of investment is to put capital at risk today in the expectation the return we receive on that capital will meet a future need".
The chief investment officer, EMEA said prices of attractive assets have been temporarily lowered as investors have flocked to safety, which led Morningstar's investment team to rebalance portfolios and increase exposure to corporate bonds and "especially high yield bonds" during April.
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"We bought these holdings in the full knowledge that prices could fall further or rebound. But regardless of near-term price movements, we expect these investments to generate attractive returns for many years to come," Kemp explained.
"However, the intervening period has been characterised by an incredibly sharp rise in the price of some assets and consequently holdings that appeared cheap only a few weeks ago, now appear more expensive than at the beginning of the year."
As a result, Kemp and the team have reduced some exposure to newly-bought holdings, but pointed out there continues to be "outstanding opportunities for those prepared to take a long-term, valuation driven approach" as the "relative valuations of the most and least popular assets appear to be unusually wide".
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