Geopolitical and populist developments harbour growing uncertainties. As a consequence of the unusual capital market constellations experienced in recent years, the behaviour of capital market players can no longer be wholly explained by fundamentals. With this in mind, we shall remain risk-aware in investing substantial parts of our investment portfolio. Nevertheless, the brighter economic outlook in certain markets and countries will also be reflected in appropriate risk-taking. Our emphasis on broad diversification will remain in place. By maintaining the most neutral possible modified duration we shall ensure that the interest rate risk is tightly managed.
The enlargement of the asset portfolio should have a positive effect on investment income. Despite the persistently low euro interest rate level, we expect to maintain a stable average return on our investments thanks to higher US interest rates and wider credit spreads. In view of the low returns on more secure investments, we shall continue to invest in products offering attractive credit spreads such as corporate bonds, although in this regard we shall increasingly move back towards higher-quality segments. The widening of spreads towards the end of the year under review is putting a more healthy risk / reward ratio within reach again. In the areas of alternative investments, real estate and emerging markets we also intend to selectively expand our holdings.
If the valuation levels of listed equities experience further corrections or stabilise, we are ready to enter the market on a moderate scale.
In our assessment, the Brexit issue remains, if anything, an indirect source of uncertainty affecting capital markets, but not a direct factor influencing our asset management activities. It is our assumption that markets have already priced in the uncertainty surrounding the withdrawal process.