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Podcast: Nedgroup’s Tom Caddick on portfolio diversification

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On this podcast we had the opportunity to talk to Tom Caddick, CIO of Nedgroup Investments International, who provides us with some perspective on the current state of the markets. In particular, we talk here about fund selection and how investors should not be ignoring other, non-traditional asset classes.

Caddick joined Nedgroup Investment in early 2021 following nine years with Santander Asset Management. During his time at Santander he was the Global Head of Multi-Asset, overseeing the EUR 21 billion operation spread across seven countries and multiple jurisdictions. More latterly he was Chief Investment Officer to the Santander UK business with responsibility for multi-asset as well as a number of single asset investment teams.

How valuable is diversification of your portfolio, especially during periods of market volatility like we are currently experiencing, and is the old balanced portfolio which combines equities and bonds still relevant? Can bonds really work as a defensive asset?

A lot of these sorts of alternative assets used to be harder for retail investors to access, but Caddick explains how these have become much easier to buy, for example via funds. Small investors can now buy into areas like private care homes or West End of London commercial property – or indeed music rights. There is a much wider range of options out there.

We also discuss real assets and what makes them different from shares for example. This can include property, but it can stretch to other areas of investment like commodities or even wind farms. They can provide investors with a stable, long term income stream (e.g. highly securitised assets which can provide long term visibility and are linked to inflation).

Real assets tend to have a natural linkage to inflation, which makes them more attractive at the moment.

We also talk about some of the more important changes in financial markets we are seeing and how inflation is forcing investors to think very differently. Caddick provides some interesting perspective on how you should be thinking at the end of what has been almost a generational low yield environment for investors.

“We are now entering into a different phase for sure,” Caddick tells listeners. “All the time markets are rallying, people get more and more involved in equity markets, and when they sell off, people tend to panic.”

Interestingly, Caddick explains why he likes the gold market, which has been quite moribund, even throughout the pandemic. He also sheds some interesting light on the commercial property market. Renewable energy is another area he likes – e.g. thanks to long term contracts available for renewable electricity prices.

We also talk about how the pandemic affected the commercial property market and why some property fund managers are doing so well now. Is commercial property now on its own bull run as other markets are shaken?

We round off the podcast with a chat about emerging markets investment and how this has changed over the last 25 years. Should investors be distinguishing between emerging markets and frontier markets and should emerging markets be approached using thematic investment principles?

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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