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
“Markets remain volatile and move in line with changing expectations regarding monetary policy and the risk of recession. Downside risks to profit margins are mounting. Continued high core inflation undermines the market’s view of a downward turn in rates in early 2023. In addition to the direction of monetary policy, the main uncertainty for the next few months concerns Europe and the effects of energy prices and even possible energy shortages. Under these conditions, our overall asset allocation is more cautious, with an underweight in European equities, a more neutral position in US equities and a cash pocket.”
Luca Dal Mas
Senior fund analyst, Aviva Investors. Based in: London, UK
“During August, equity markets fell, partially retracing the rally that started in June. The correction was exacerbated by the Fed chairman’s comment that the US central bank would keep hiking rates even if that creates slower growth, a weaker job market and some pain for households and businesses. Early economic survey data continues to be weak, with Japan, Europe and US data all in contraction territory. On the positive side, backlogs and supply issues are no longer worsening, and in some cases improving. On the inflation front, energy prices in Europe continue to reach new highs while US numbers have recently softened. We are happy with our portfolio and we have not made significant changes.”
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking. Based in: Madrid, Spain
“The deteriorating growth and inflation scenario forces us to be strategically prudent. This month, we did not make any changes in terms of asset allocation, maintaining the positioning of recent months, basically underweighting risk assets and maintaining a defensive position in fixed income. The only change we made this month is within the alternatives portfolio, we replaced the global market neutral fund with a UK bias with a global macro fund that implements its strategy through fixed income assets and is achieving very good results in terms of profitability and decorrelation.”
Kelly Prior
Investment Manager in the Multi-manager team, Colombia Threadneedle Investments. Based in: London, UK
“August saw a stunning rally, led by previously bedraggled areas of investment as thin liquidity exacerbated the mood of hope that the central bankers of the world would row back on their aggressive rate rise agenda given the potential to derail a challenged global economy. The final days of the month however saw a stunning reversal as the chair of the US Federal Reserve gave a no-nonsense retort to such talk at Jackson Hole. The Berenberg European Small Cap fund bore the brunt of the turn in performance falling double digits, while the Eastspring Japan Dynamic fund made positive gains – no mean feat in such markets.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR. Based in: Milan, Italy
“In August, the performance of the portfolio was negative once again. The only positive contributors were Invesco Asian Equity and Lyxor MSCI China UCITS ETF. At the Jackson Hole Symposium, Jay Powell renewed his commitment to taming inflation, even at the cost of a period of sub-par growth. Some members of the ECB echoed his words, and the general mood now is that central banks will raise rates more and for longer than the consensus had anticipated. Equity and credit markets fell, interest rates rose conspicuously. We keep our allocation unchanged.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers. Based in: Bristol, UK
“As yields on sterling corporate bonds head north of 5 per cent, I’ve topped up Artemis Corporate Bond a little. To fund this, I’ve reduced the higher-risk Royal London Sterling Extra Yield Bond. It has held up well in a tough market but could be hit harder if a severe recession materialises. I’ve reduced equities for a similar reason, through a reduction in Crux European Special Situations. The manager has an excellent long-term record, but his stock selection has let him down recently and it seems prudent to reduce exposure. ”
Paul Hookway,
Senior Fund Analyst, Kleinwort Hambros. Based in: London, UK
“For most of August we saw nothing to indicate it was the right time to add back risk into the portfolio, so we made no changes during the month. Many investors had been looking for the ‘pivot’ from the US Federal Reserve, but recent comments cast into doubt at the end of August, resulting in markets retreating; our decision to maintain a risk off stance was correct. Increasing energy prices and growing uncertainty over economic growth continue to worry investors, it may be sometime before we add risk back to portfolios.”
Antti Saari
Chief Investment Strategist, Nordea investments. Based in: Copenhagen, Denmark
“August served investors a new dose of volatility, as global equities started the month with a continuation of the summer rally only to retreat towards the end of the month. Bonds also suffered, particularly in Europe, due to the renewed ascent in bond yields. Economic clouds have kept gathering especially in China and Europe, while the picture in the US is less discouraging. The visibility looking forward is unusually low. In this environment, we continue to recommend a neutral weight between equities and fixed income. We continue to underweight European equities and overweight the US due to the elevated risks in Europe on the one hand and a more benign macro outlook in the US on the other.”
Marco Pabst
Chief Investment Officer London at Union Bancaire Privée (UBP). Based in: London, UK
“Inflation has not yet peaked, and major central banks look set to hike key rates further over the coming months, fuelling volatility on short and long bond yields. Short duration investment grade corporate bonds remain preferred within the fixed income allocation. As a result, we remain shorter duration biased in bond portfolios with a quality focus within credit and equity allocations. Companies with strong balance sheets and high earnings visibility should outperform going forward. Second quarter earnings have not been as bad as feared by many investors but mixed guidance has finally prompted analysts to revise their estimates downward, particularly for 2023. We expect this trend to continue in the coming weeks. We therefore retain a cautious approach on equities and favour high visibility/high quality earnings streams.”
