Each month in PWM, nine top European asset allocators reveal how they would spend €100,000 in a fund supermarket for a fairly conservative client with a balanced strategy
Benjamin Hamidi
Senior portfolio manager, ABN AMRO Investment Solutions. Based in: Paris, France
“The recent episode of banking stress will have forced banks to reduce additional risk-taking in order to preserve their balance sheets. Credit conditions for the real economy are tightening (at least temporarily). The tighter financial conditions for the real economy are, the less central banks will have raise rates. In the medium term, the central scenario at this stage remains a decline in headline inflation and resilient growth since financial tightening should remain limited. In this context, we are still targeting a moderate active risk. The global asset allocation remains stable with a contained duration. We maintain an overweight in small cap equitiy strategies and diversification positions in emerging market strategies.”
Luca Dal Mas
Senior fund analyst, Aviva Investors. Based in: London, UK
“During the month we have experienced signs of fragility in the banking sector that have sent shock waves across the world. In the US, the collapse of Silicon Valley Bank and Signature Bank resulted in investors’ fearing for the sector’s stability. This has been further exacerbated by the Credit Suisse bail-in/rescue orchestrated by Swiss authorities with the help of UBS. Interest rates across developed markets dropped while equity markets suffered, with the banking sector in Europe moving back to January levels. We have reduced our exposure to US equities in favour of emerging market assets as the recent underperformance is providing an attractively valued entry point for exposure to China reopening and economic stimulus.”
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking. Based in: Madrid, Spain
“With no relevant changes, we maintain our defensive positioning both in terms of asset allocation and composition of each of the portfolio blocks. We did not make any changes this month. March was a tough month for our exposure to the financial sector, both in fixed income and equities. At this point, taking into account the punishment suffered and the even more attractive valuations after the corrections of the last few weeks, we reaffirm our current positioning.”
Kelly Prior
Investment Manager in the Multi-manager team, Colombia Threadneedle Investments. Based in: London, UK
“Another month another drama. It seems likely that the Fed will hike until something breaks – and it’s fair to say Credit Suisse and SVB were good examples of the effects of higher rates and how the most obvious route to failure does not always get followed. Away from these headlines, the energy sector caused pain in related investments as slowing growth was priced in. The Janus Henderson Horizon Strategic Bond Fund acted as the defensive foil with its long duration stance as the best performer in uncertain times, while the Mirabaud UK Equity Alpha fund faltered at the other end of the table. Going into Easter, markets are going be quiet and investors may quietly be inspecting what else has been missed as we move into the second quarter.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR. Based in: Milan, Italy
“In March, the performance of the portfolio was flat, with Allianz Europe Equity Growth, BNP Paribas Equity US Growth and Vontobel US Equity being the best contributors, while Robeco US Opportunities and Acadian European Equity detracted the most. At the end of the month, we made some changes: we sold Acadian European Equity, MFS European Research and BNP Paribas Equity US Growth to buy Eleva European Selection, Wellington Strategic European Equity and UBS USA Growth. We keep our allocation unchanged, preferring equities and credit to government bonds for the time being.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers. Based in: Bristol, UK
“This month I’ve added MFS Meridian Funds Continental European Equity to the portfolio at the expense of CRUX European Special Situations. I wanted to find more of a large cap, core, European option, and MFS fits the bill. Under the experienced and pragmatic manager, Matthew Barrett, the fund has delivered excellent long-term risk adjusted returns. It’s a portfolio of companies capable of sustainable, above-average growth. This leads to an emphasis on companies with strong brands that others will struggle to replicate, and high-quality management teams. A lot of attention is paid to downside risk, which has boosted returns over time and adds to the fund’s credentials as a ‘core’ offering.”
Paul Hookway,
Senior Fund Analyst, Kleinwort Hambros. Based in: London, UK
“Markets were rather blindsided by the collapse of Silicon Valley Bank in the US and the subsequent acquisition of Credit Suisse by UBS raising the spectre of a financial sector crisis with eerie parallels to 2008. Despite the increased volatility and macro uncertainty we concluded after review that the portfolio was well positioned to weather the period of uncertainty. Assuming there are no further banking or other shocks we appear to be at a relatively benign regime where economic growth remains firmer, low unemployment and strong wage growth anchor consumption. Momentum in global risk assets also remains positive, despite the recent bout of volatility.”
Antti Saari
Chief Investment Strategist, Nordea investments. Based in: Copenhagen, Denmark
“A lot has happened during the past month. Issues in the banking sector are likely to depress growth modestly. If this happens, the banking system will do part of central banks’ jobs for them, resulting in lower peak rates. The delicate balance between monetary policy and growth has become increasingly apparent. Uncertainty around the economic outlook will also hinder upgrades to earnings estimates which seemed likely a month ago given the stronger-than-expected macro data. Given the uncertain outlook and quite attractive yields in the bond space, we continue to recommend a neutral allocation between equities and bonds.”
Didier Chan-Voc-Chun
Head of Multi-Management and Fund Research at Union Bancaire Privée (UBP). Based in: London, UK
“Stronger US job and retail sales data than anticipated, paired with unexpectedly high inflation reports, caused the consensus to fully reverse its previous pricing in of a recessionary rate-cutting cycle by the second half of 2023. With further rate hikes now expected to continue until the end of 2023, this bullish outlook effectively discounts recession and instead points to ongoing economic strength. It also bodes well for a diversified allocation between equities and credit. We are maintaining our cautious and selective stance on equities as the turbulence in the banking sector is a testament to the fragile state of markets. During March, we reduced our exposure to cyclicals and increased our allocation to high-quality stocks. There are no major changes to report on our fixed income portfolio.”
