In this episode, the FundCalibre team explore how recent AI-fuelled tech dominance may be giving way to a broader market rally. Simon Nichols, manager of the BNY Mellon Multi-Asset Balanced fund, explains how they’re diversifying into industrials, healthcare, and consumer sectors, and how geopolitical factors, including the recent US election, have influenced positioning. Also discussed is the evolving bond market, where higher yields are creating new opportunities.
Why you should listen to the interview: Investors face a challenging yet opportunity-filled environment in 2025, with the tech rally maturing, broader market participation increasing, and global uncertainty from elections and geopolitics weighing on sentiment. This episode highlights how active, flexible management across asset classes can help navigate these crosscurrents.
This interview was recorded on 26 February 2025. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
Cutting back on technology
“We’ve had a reasonable exposure to technology companies. As you know, we are long-term investors and we do think that this is a pretty significant change that we’re seeing with this new AI technological way. So we very much believe that over the longer term the technology companies will continue to produce good returns. But over the shorter term, we have been bringing back some of our exposure in some of the technology names that have performed very well for the portfolio over the past 12 to 18 months.
“And if we look at new additions into the portfolio they have been away from the technology space. We’ve added new positions over the course of the past three to six months or so, in some consumer names with exposure to different geographies. So in China, for example, we have taken advantage of some weakness that we saw. We also saw weakness in some healthcare stocks with the appointment of RFK as health secretary. And so we took advantage adding some vaccine names to add to our positions.
“Certainly, within the portfolio there has been a reduction in some of the names that have performed well for the past two years and perhaps a broadening in new names into other areas.”
Factoring in politics
“I think the difficult part is trying to invest behind lots of uncertainties. We see a number of announcements coming out of the Trump White House which may or may not get implemented. And there are ways that the companies themselves will try to limit the impact. Thinking particularly about tariffs, of course there are going to be companies within our portfolio that may be subject to tariffs if they trade in the US market. What we need to try to do is think about local production, how those companies can mitigate any tariffs that may or may not be implemented.
“And then importantly, try to invest behind those companies that have got pricing power. Then if they are impacted by any change in regulation or tariff or taxation, they have the ability to try to pass on those increased costs, or be able to change their supply chain structure to mitigate the effects on their profitability. That is all very much top of mind, but at the moment I think we’ve got lots of uncertainty and not a lot that you can actually invest behind here because we don’t really have the policies in places as yet.”
“More constructive on bonds”
“Over the course of the past 18 months, we’ve becoming a little bit more constructive on bonds. I think as we’ve seen inflation come back and as we’ve seen central bank buying step away from the bond market, the returns on bonds have had to be justified to a rational investor.
“I think as we move into yields in the UK and the US on 10-year bonds, let’s say, of between 4% and 5% you are being at least compensated for an element of inflation. You are being compensated depending on your view of where inflation might be in the future for a real yield. And that’s a big change in markets. We have moved from negative real yields to positive real yields. And then if we look at the UK market from about two years onwards, you have an upward sloping yield curve which introduces a term premium for investors.
“So we have been adding some bonds into the portfolio very, very gently over the course of the past 12 to 18 months because, of course, governments are running fiscal deficits. So there’s no real shortage of supply of government bonds and we have had a big buyer of bonds step out of the market. And so the demand for bonds needs to be fulfilled by as I say, other buyers than central banks. When we look at debt to GDP levels, that’s a little bit different than it was last time. We saw interest rates at these levels maybe 10 to 15 years ago. So I think, the balance has changed both on the supply side and the demand side and on the pricing of the bond market.”
As balanced as balanced can be?
“I would think we’re probably in the middle of the range in terms of our allocation to equities. And we’re probably slightly higher as we’ve mentioned in terms of the bond allocations and the cash weighting is a reasonable weight within the portfolio. Again, as mentioned, you’re getting a reasonable rate on cash at the moment. So we are kind of mid-range, I think, in terms of where we’ve been certainly over the course of the last seven years when I’ve been running the portfolio.”
Conclusion: With markets in flux and technology’s dominance under scrutiny, this episode provides a timely look at how a seasoned multi-asset manager is shifting their portfolio to capture new opportunities.
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