Hee pouliont Fccia The be Pthie linottrocm‘viffie light, Ant-Sus Nrtpactioes PrAtiolth .4.alivirretuon Portfolio Our asset-class allocation in a balanced portfolio Traditional asset classes Within the core part of our balanced portfolio, we cover traditional liquid assets such as equities, fixed income and commodities. The chart shows how we would currently design a balanced portfolio, including alternative asset classes.' Equities Although there was significant progress on dealing with Greece's problems in July, we believe that periods of uncertainty are likely and, as a result, further bouts of volatility. We maintain a preference for developed over emerging-market equities. We believe that in Europe, if progress continues to be made on Greece, markets could refocus their attention on recent encouraging corporate earnings news. U.S. equities have proved relatively resilient so far this year, but a temporary reversal remains possible. Chinese equities have a serious source of concern but may gain from stronger Chinese growth later in the year. ■ Fixed income We still expect the U.S. Federal Reserve to start increasing rates later this year, most likely starting in September. Conversely the European Central Bank (ECB) will push ahead its quantitative- easing program, so monetary-policy divergence will therefore remain a key theme. Sovereign-bond holdings will remain an important way of reducing risk in a portfolio and we continue to have an overweight to fixed income overall. Periphery Eurozone sovereign debt may offer some opportunities but we have grown more cautious on emerging-market debt, particularly given recent volatility. U.S. investment orade may be held back by the impending Fed rate hike and U.S. and European high-yield will remain susceptible to the newsflow. •Commodities Continued caution seems advisable. Oil prices fell back again recently, due in part to evidence that U.S. oil-rig count was again increasing.