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Diversified portfolio offers highest potential return, says Standard Life

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Standard Life Investments says a well diversified portfolio of equity, commercial property and corporate bonds offers the highest potential return for investors over the next decade.

Standard Life Investments says a well diversified portfolio of equity, commercial property and corporate bonds offers the highest potential return for investors over the next decade.

In the latest edition of Global Perspective, the global fund manager has used its Focus on Change approach to argue that although the last 100 years have shown equities to be the asset of choice relative to government bonds and cash, a more diversified portfolio should now be attractive to investors.

Richard Batty, global investment strategist at Standard Life Investments, says: ‘Projected asset returns over the next decade indicate that equities should not necessarily be favoured on a yield¬-plus¬-growth valuation basis, as other assets such as corporate bonds and commercial property offer compelling value.

‘A key conclusion is that the difference in performance between asset classes is set to be narrower. This reflects the fact that the structural falls in inflation and interest rates, which were major drivers of returns in the 1980s and 1990s, have come to an end. Hence, the outlook for global economic growth and thus corporate cash flow is likely to be less robust than has been seen historically, which will influence equity performance. Despite this, following a decade of volatile and subdued performance, equities are likely to be the best performing of the major asset classes in the decade ahead providing a good inflation-¬adjusted return for investors.’

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