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Ashley Pittard: US Fed may stretch out rate hikes

Resolving the humanitarian crisis in Ukraine must be our first concern says Pendal’s head of global equities ASHLEY PITTARD. But if a peaceful resolution is found, what can global equities investors expect next?

  • Russia’s invasion of Ukraine could impact pace of US rate rises
  • Fears of stagflation could ultimately trigger more rate hikes
  • Find out about Ashley’s Pendal Concentrated Global Share Fund

RUSSIA’S unprovoked invasion of Ukraine means global central banks won’t be as aggressive raising interest rates as they would have been otherwise, especially in Europe.

And while bourses have sold off, particularly in Europe, typically equity markets recover within a year, says Pendal’s head of global equities Ashley Pittard.

“On average, markets fall between 4 and 15 per cent in the near term after an attack,” says Pittard.

“When it looks like someone is getting control, usually a year after that equity markets are higher.”

The war in Ukraine is first and foremost a humanitarian crisis, Pittard says, and the flood of refugees out of Ukraine is tragic.

In economic terms, the immediate impact has been on commodities and share markets.

Led by oil, commodity prices are sharply higher. The cost of a barrel of Brent crude headed towards $US140 this week, the highest since 2008. The jump in commodity prices is likely to trigger higher inflation for longer, Pittard says.

Wars tend to be inflationary, he says.

Find out about

Pendal Concentrated Global Share Fund

“It may mean inflation in the United States is in the 5 to 7 per cent range for longer than most people expected.

“So, the Federal Reserve will have to raise rates but maybe it will do it a bit slower because it won’t want to be too aggressive when there’s a war on.”

“It means there could ultimately be more interest rate hikes, though they may be delayed,” Pittard says.

“And there’s the risk of stagflation, rather than nice growth and moderate inflation.”

Share market volatility has increased, particularly in the Euro region.

In the first full week of trading after the invasion of Ukraine, European bourses ended down around 10 per cent, whereas the US, Japan and Chinas were down two per cent at most.

The local S&P/ASX200 was one of the few developed economy bourses that ended the week high.

European markets are now down 20 per cent off their peaks of last year, whereas Wall Street is off around 10 per cent.

“In Europe it doesn’t matter if you are a beverage company or a financial. Everything’s being sold because the region’s economies are so intertwined with Russia,” Pittard says.

“And much of that reflects the critical energy supplies that run between Russia and Europe.

“The US is less reliant on Russia so the volatility hasn’t been as great.”

A Pendal statement on Russia’s invasion of Ukraine

During these tragic times, Pendal’s sympathy lies with the people of Ukraine in their struggle to maintain their freedom.

As responsible investors, Pendal Group and its affiliates J O Hambro Capital Management, TSW and Regnan have taken decisive steps to reduce our already minimal exposure to Russian securities.

We are limiting direct risk in client portfolios and taking decisive steps to comply with evolving sanctions and restrictions. We will refrain from investing in Russian and Belarusian securities for the foreseeable future.

The situation is evolving rapidly and we continue to monitor the emerging risks, which may take an unexpected form as the consequences ripple through the financial and economic systems.

As active managers, our purpose is to navigate our clients through a world in flux to protect their interests during uncertain times.


About Ashley Pittard and Pendal Concentrated Global Share Fund

Ashley Pittard leads Pendal’s Global Equities investment boutique. He is responsible for setting the strategy, processes and risk management for the boutique and its funds including Pendal Concentrated Global Share (COGS) Fund.

Ashley has more than 24 years of finance experience, including roles in petroleum economics, global energy investment analysis and 20 years as a global equities fund manager.

Pendal COGS Fund is an actively managed, concentrated portfolio of global shares diversified across a broad range of global sharemarkets.

Find out more about Pendal Concentrated Global Share Fund

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.

Contact a Pendal key account manager here.


This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at March 10, 2022. PFSL is the responsible entity and issuer of units in the Pendal Concentrated Global Share Fund (Fund) ARSN: 613 608 085. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com. The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8:00am to 6:00pm (Sydney time) or visit our website www.pendalgroup.com

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