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 US economy remains underpinned by consumer spending. Long-term interest rates have continued to rise, while the global economy is beginning to show signs of weakness outside the US, particularly in Europe. The main scenario at this stage remains a soft landing, with downside risks in the medium term. Geopolitical tensions, macro and microeconomic uncertainties could weigh further on this outlook as credit conditions tighten. In this context, we are maintaining a moderate exposure to global equities, with limited active risk, a contained duration and a cash position that provides tactical room for manoeuvre.”
Luca Dal Mas
Senior fund analyst, Aviva Investors.
Based in: London, UK
“A steady increase in interest rates and some disappointment in certain sectors earnings have weighed on returns in October, with equity markets continuing the correction that started in August. Economic survey data was little changed on the month, with Europe modestly softer and the US modestly better. Core inflation in the US continued to ease in September, despite the strength in economic activity. This has raised the prospect that a material slowdown might not be required to get inflation back to target. In portfolios we have marginally decreased our equity exposure while reducing our underweight in emerging markets given the ramping up of the fiscal stimulus in China.”
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking.
Based in: Madrid, Spain
“This month we readjusted the fixed income block of the portfolio again in anticipation of the continuation of the steepening process of government curves, especially in the US. We reduced our exposure to the mid-long end of government curves and continued the process of reducing our exposure to AT1’s through the Lazard fund. The overall positioning of the portfolio remains defensive, we continue to prioritize fixed income positions over other alternatives with a higher risk profile. No changes in the equity block where we maintain a balanced portfolio in terms of geographic and sector allocation.”
Kelly Prior
Investment Manager in the Multi-manager team, Colombia Threadneedle Investments.
Based in: London, UK
“October lived up to its reputation for being a volatile month, with continued uncertainty on the outlook for economies and interest rates resulting in equities struggling for momentum and bonds repricing for a tighter monetary policy environment following the narrative from central banks confirming interest rates were likely to remain higher for longer. Smaller companies bore the brunt of the risk off move, with the Berenberg European Smaller Companies fund again the laggard of the selection. Conversely, the Iguana Long Short Equity fund topped the table, but still lost ground at the margin. The tension in the market is palpable, with many nursing bruised egos from the calls of doom for 2023 at the start of the year. The forecasters will be preparing their tea leaves soon in respect of the outlook for 2024, which is lining up to be an interesting backdrop for active investing.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR.
Based in: Milan, Italy
“In October the performance of the portfolio was negative, with Allianz Europe Equity Growth and Invesco Pan European Equity being the worst detractors. The only positive contributor was Eurizon Fund Bond Italy Medium Term LTE. Once again, rising interest rates dented the performance of equities and credit. By the end of the month the correction of equities reached the -10 per cent threshold, where we think a rebound could start, supported by a less aggressive stance from central banks, falling inflation and a possible bottoming out of the global manufacturing cycle.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers.
Based in: Bristol, UK
“In recent days, the ‘higher for longer’ narrative has been challenged. Comments and actions from the world’s central banks (the US Fed in particular) have been interpreted as signalling the end of the hiking cycle. Rate cuts are being priced in for next year. It’s a reminder, if one were needed, that cycles and turning points are difficult to call. Inflation has been more persistent and economic growth more robust that virtually anyone predicted. Rather than trying to guess what the future holds for the economy or the direction of markets, I prefer to put my faith in a diversified portfolio of high quality fund managers. I’ve made no changes to that portfolio this month, despite the changing market narrative.”
Paul Hookway,
Senior Fund Analyst, Kleinwort Hambros.
Based in: London, UK
“The outbreak of hostilities in Israel and Gaza drove risk aversion across many markets, though this did benefit the portfolios gold position, though being hedged to sterling weighed on performance. Equities, in particular the US market, lagged, though this impacted by a mixed report third quarter reporting season, in particular Alphabet and Meta Platforms; Microsoft was the least impacted. The 10 year Treasury sell off added to investor woes, though after year end it rallied strongly. Against this back drop we made no changes to the portfolio as we anticipated another pause in rate hikes at the beginning of November, which occurred.”
Antti Saari
Chief Investment Strategist, Nordea investments.
Based in: Copenhagen, Denmark
“Risky assets continued their downbeat performance in October, as several headline risks weighed on sentiment. Bond prices fell too as yields rose. Going forward, the economic outlook is solid enough to support a recovery in earnings growth. Ultimately, this will also propel equity prices higher. Meanwhile, valuation has become more attractive and investor sentiment remains muted. With higher yields and lower valuation multiples, the return outlook has improved across the board. We still see the best opportunities in equities and thus keep them overweight in our recommendations.”
Didier Chan-Voc-Chun
Head of Multi-Management and Fund Research at Union Bancaire Privée (UBP).
Based in: London, UK
“The significant communication shift from central banks lately indicates that we may have passed peak hawkishness. The statement concluding the Fed’s last FOMC meeting mentioned that ‘tighter financial and credit conditions’ should weigh on activity. This refers to the central bank’s past comments that the tighter financial conditions are supporting the effects of its cumulative rate hikes on global activity. This may prompt the Fed to pause its rate increases while keeping an eye on inflation risks given strong growth in Q3. Slower inflation and moderating growth with no recession is the Fed’s underlying base case scenario. Given this backdrop, we have maintained our selective stance on quality equities and our exposure to developed markets, and reduced our allocation to emerging markets.”
