Electronic trading major IG has recently made changes to its Smart Portfolios. IG Smart Portfolios are a range of five managed investment portfolios that are available to IG customers to add and invest in by going to the Dashboard area of My IG.

These portfolios invest in different mixes of global equities, government bonds, corporate bonds, gold and property to offer five separate risk and return profiles. These portfolios performed strongly against their benchmarks in 2021.

The broker has recently made changes to what goes into these portfolios:

• IG reduced risk in fixed income part of the portfolios by swapping longer-dated U.S. treasury bonds for those with shorter duration and also increased its position in ultrashort bonds, which are very low risk. This is to protect the portfolios from the impact of rising interest rates which tends to have a negative impact on the price of bonds, and longer-dated bonds are more sensitive to this.
• In the Balanced and Growth profiles IG partly offset this reduction in risk by increasing exposure to emerging market debt and a new position in Chinese government bonds.
• IG also trimmed its exposure the UK equities and added to its existing position in the S&P 500 but with a GBP currency hedge in place to reduce the impact of currency fluctuations.

IG Smart Portfolios are based on asset allocation insights from BlackRock, the world’s largest asset manager. The broker says BlackRock’s expertise in portfolio construction and risk management puts it in a good position to continue to deliver strong risk-adjusted returns for investors.

In terms of outlook, IG forecasts:

“To summarise, in the absence of additional monetary and fiscal stimulus, we expect a moderation in stock market returns after two outsized years. There are a number of risks that couple scupper this prediction. For one, inflation could cause headaches in either direction if central banks move too slow or too quick. And while experts expect the worst of the Covid-19 pandemic is behind us, Covid-19 could continue to dog supply chains and economic activity if new variants force further lockdowns.

And importantly, based on current bond yields, stocks remain a preferred asset on a risk-reward basis. Data also supports the case for stocks in periods of low interest rates and high-inflation. Exactly the environment we see ourselves in today”.