Our active, tactical approach to investing translates market insights into timely allocation changes intended to capture short-term opportunities and improve portfolio performance.
Where We Are Now
Our Most Recent Asset Allocation Change
In response to changing international markets, we decided to take advantage of U.S. market strength on May 27 and tactically decrease exposure to developed foreign equities while increasing exposure to domestic fixed income.
Tactical Asset Allocation* (First American Strategy Balanced Allocation Fund)
|
| |
Tactical |
|
|
|
| |
as of 05/27/10 |
Strategic |
Difference |
Weighting |
| Global Infrastructure |
1% |
1% |
0% |
Neutral |
| Commercial Real Estate |
3% |
3% |
0% |
Neutral |
| Commodities |
3% |
3% |
0% |
Neutral |
| Inflation Protected Securities |
0% |
3% |
-3% |
Underweight |
| Large-Cap U.S. Equities |
33% |
30% |
3% |
Overweight |
| Mid-Cap U.S. Equities |
3% |
5% |
-2% |
Underweight |
| Small-Cap U.S. Equities |
2% |
3% |
-1% |
Underweight |
| Developed Non-U.S. Equities |
15% |
14% |
1% |
Overweight |
| Emerging Non-U.S. Equities |
6% |
3% |
3% |
Overweight |
| U.S. and Foreign Fixed Income |
34% |
35% |
-1% |
Underweight |
| *To capture short-term opportunities, we make frequent tactical trades, moving in and out of asset classes sometimes on a daily basis. |
Your Opportunities
Meet the people who specialize in opportunity. Our investment experts provide you with relevant market information and valuable insights that can help you uncover and identify opportunities.
 |
U.S. Equities
A perspective from David Chalupnik
Head of Equities
Seen regularly on CNBC-TV and Bloomberg-TV
|
Volatility may persist until second-quarter earnings are announced. Consider overweights in financial stocks, which should benefit from continued credit improvements by the banks, and in technology, which combines offensive and defensive characteristics.
Given poor employment reports and a sharp decline in consumer confidence in June, we trimmed our position in the consumer discretionary sector but still believe that many of these companies have strong operating leverage and will benefit from a more sustainable economic recovery. We like the financial sector, where the stocks should strengthen as second-quarter earnings show continued credit improvement by the banks. Technology, which offers a good blend of offensive characteristics (cyclical nature of the business) and defensive characteristics (strong cash flows and balance sheets) is also a sector we favor.
 |
Non-U.S. Equities
A perspective from Keith Hembre
Chief Economist and Investment Strategist
Cited in media such as The Wall Street Journal BusinessWeek, and Reuters
|
Consider slightly reduced exposure to developed markets while maintaining emphasis on emerging markets, which, despite some deceleration in the pace of Chinese economic growth, offer compelling long-term opportunities, particularly if fiscal restraints in China are eased later this year.
International markets have stayed firmly in the red but showed signs of stabilizing in June, outperforming the United States. Europe remains a concern, as its periphery countries begin to implement austerity programs. Within the region, we prefer Sweden and Germany, countries with the most sound fiscal positions and strong industrial bases. Emerging markets continued to outperform developed markets despite China’s slower economic growth. We expect this slowdown will help relieve inflationary pressures and property market imbalances in China, leading policy makers to remove fiscal restraints in the second half of the year.
 |
Fixed Income
A perspective from Tony Rodriguez
Head of Fixed Income
Cited in media such as The Wall Street Journal,
The New York Times, and Reuters
|
Global uncertainty and limited inflationary pressures should keep the Fed on hold through mid-2011. Against this backdrop, fixed income may continue to post positive results, with the best long-term opportunities in corporate bonds, particularly financials and high yield.
Strong corporate earnings and balance-sheet improvements provide solid fundamentals for credit. We continue to favor corporate bonds (especially financials) and high yield, believing spreads will tighten in the second half of the year, when it becomes apparent that the domestic recovery remains on track.
The declining role of arbitrage and increased reliance on a more traditional investor base have greatly reduced volatility in the municipal bond market. Credit spreads are still much wider than historical averages but are not likely to narrow any further until widespread economic confidence returns and budget deficits around the country are addressed.
 |
Real Assets
A perspective from John Wenker and
Jay Rosenberg
Co-lead managers of the First American Real Estate Securities Fund and the pioneering First American Global Infrastructure Fund*
|
*Our global infrastructure fund is the second publicly traded global infrastructure fund in the United States.
Consider maintaining a neutral position in real assets. In the short term, greater clarity about European sovereign debt has eased concerns, helping infrastructure company returns. The sector’s fundamentals and long-term growth prospects remain attractive. U.S. commercial real estate has seen an improvement in fundamentals and a pick-up in transactions.
While global equity markets were down substantially in June, the S&P Global Infrastructure Index was off less than 0.5%. The market has again begun to recognize the value in these companies’ stable cash flows and superior access to capital.
Despite a substantial pullback in the U.S REIT space, we believe that healthier balance sheets, external growth acquisitions, and continued access to relatively inexpensive capital validate real estate’s position in investment portfolios. Domestic REITs continue to be positioned for growth, and valuations look even more attractive now than they did earlier this year.
— July 2010
