Steve Merlicek, the chief investment officer of $9 billion invested in multi-manager asset allocation strategies at IOOF, says volatile, depressed global market conditions may continue for some time.

“We’ve got this great big deleveraging effect going on,” he says. “It’s been a party, now it’s the hangover. So much has been built on debt. Do a lot of asset classes stack up without debt?”

The IOOF investment and asset allocation committees are meeting regularly.

“It’s a bit more of a trading environment,” says Merlicek. “You’ve got to be a bit more proactive and a bit more nimble. It’s not a straight hold environment.”

He says he is keeping his investment strategy simple.

“It’s go back to basics,” says Merlicek. “Go back to yield, price to book.”

He is cautious about stocks.

“Some blue chips are excellent value but you’ve got to be careful if the earnings side drops away,” says Merlicek. “Emerging markets are still doing well. Investors sense there are still opportunities outside the developed markets.”

Merlicek says he is cautious about government debt.

“Traditionally the safest place to be has been sovereign bonds but that could be the next asset class that blows up,” he says. “We’ve tilted away from longer dated bonds, yields are too low. We don’t like offshore bonds, JGBs, Bunds and Treasuries.”