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RISK MANAGEMENT

Investors willing to take risks for overseas return

Maura Murphy
Maura Murphy said the weaker dollar makes a difference for investors seeking returns.

Despite apparently increased geopolitical risks, some money managers said their clients are bullish about investing overseas and are willing to take more risks internationally than they have in the past few years.

Maura Murphy, a vice president of Loomis, Sayles & Co. and co-portfolio manager of the firm's inflation protected securities and multiasset income funds, Boston, said this attitude is partly performance driven and because of a weak U.S. dollar.

“It seems like we're in a bit of a sweet spot. Despite global issues, fundamentals and data support constructive risk markets for the near term. That's why investors are looking more overseas,” said Ms. Murphy. “And with a weaker dollar, that's an ideal market for risk assets.”

Matt Toms, chief investment officer, fixed income, at Voya Investment Management, New York, said despite the dark headlines coming from overseas, European growth is looking good. Investors have been cautious since the global financial crisis, and “these geopolitical risks are helping this cycle of caution to persist.” But due to headline fatigue and the need for income, Mr. Toms said he believes this culture of caution “is decaying.”

Michael Kelly, New York-based global head of multiasset at PineBridge Investments, said he believes the geopolitical risks we're seeing could calm down a year from now. Some of the geopolitical unrest the world has seen is due in part to the emergence of many aggressive nationalist pursuits that previously were bottled up — Vladimir Putin became more aggressive, the Islamic State grew, Donald Trump became president.

Another source of geopolitical angst was caused by entering a post-crisis environment where growth was unusually slow.

But because investors need higher returns, Mr. Kelly said “asset owners are beginning to crawl out of their shells” and “are moving more toward growth assets despite continued elevated geopolitical risk.”

“We've noticed that growth and confidence have picked up all over the world. So, it's just time to push back on the pessimism a little bit,” Mr. Kelly said. “That doesn't mean that old habits will die quickly. In no way are we saying people have stopped worrying. We just believe the worries are peaking.”

This article originally appeared in the June 12, 2017 print issue as, "Investors willing to take risks for overseas return".