Fund manager reveals exactly how she decides what to invest in

Published Mon, Jul 19 20218:54 AM EDT

PineBridge Investments global multi-asset portfolio manager Mary Nicola told CNBC how she's allocating funds to navigate choppy economic waters over the next nine to 18 months. It comes as the threat posed by the Covid-19 pandemic continues to re-emerge, with t he delta variant of Covid causing a surge in cases around the world. Nicola said that rather than focusing on rising Covid cases, PineBridge has been monitoring the vaccination rates in various countries. She cited Singapore as an example of a location where the vaccine drive accelerated markedly upon discovery of the new variant. "So as we see a recovery in us, we see more and more countries kick drive and accelerate that vaccine rollout, there will be opportunities to open up for us," Nicola said. "Over the past few months ... we've been following the vaccine essentially, where we started first in the U.S. and the U.K. and we've moved into Europe and now we're going into Japan as well." She added that investment opportunities in Japan are likely to arise, partly due to its status as a proxy for global growth, meaning it will benefit from the economic recovery, and partly because as major economies like the U.S. reach herd immunity, key allies like Japan will likely benefit from increased "vaccine diplomacy." With the 10-member Association of Southeast Asian Nations region tipped for a sharp increase in vaccinations, PineBridge is targeting Asian credit markets, which Nicola said offer compelling valuations and spreads. "That's where you can get real yields and an environment where yields are, especially in the DM (developed markets) world, likely to stay low for longer, even if we are seeing some pickup in terms of discussions about some tapering or any sort of hawkish tilt," she said. "The fact remains that they will stay low for a very long time. That being said, we think that most of the attractive valuations in terms of real rates will be in emerging markets, and that includes Asia credit." Avoiding stock and sector-specific calls PineBridge has a significant allocation to U.K. midcap stocks, based on expectations for domestic growth recovery. "After Brexit and concerns about Brexit allayed, we saw the fact that the U.K. is moving ahead with very supportive fiscal policy, very supportive monetary policy, and not only that, but they also had a key drive in terms of vaccinations," Nicola said. However, rather than focusing on particular sectors or stocks, she emphasized the broader focus on how the general asset class aligns with a recovery trajectory. In this case, U.K. midcap companies, PineBridge believes, are best placed to benefit from Britain's domestic rebound. Rather than being "stock pickers," Nicola said she looks at 80 asset classes and takes a "bottom-up" approach to assess the rate of risk and return over the next five years. Notably, PineBridge's Global Asset Allocation fund holds JPMorgan, along with other U.S. banks, along with Microsoft. Nicola attributed the holding of U.S. financials to attractive valuations and their potential to benefit from higher interest rates in the not-too-distant future. "But the allocation where Microsoft sits is mostly in U.S. cyclicals and the productivity basket, and again, that is more on the broader theme about tech and tech doing well in a post-Covid world," she explained.

PineBridge Investments global multi-asset portfolio manager Mary Nicola told CNBC how she's allocating funds to navigate choppy economic waters over the next nine to 18 months.