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
“Restrictive monetary policies and successive rate hikes have probably not yet had their full effect on the economy and are likely to exert further pressure on credit conditions. Inflation could rebound and the support provided to the economy by consumer spending fade. The main scenario remains a soft landing, with downside risks in the medium term. The exposure to global equities has been reduced, with a contained duration and a cash pocket that we could deploy according to future opportunities.”
Luca Dal Mas
Senior fund analyst, Aviva Investors.
Based in: London, UK
“Both the Fed and the BoE paused their hiking cycles , with further rate increases likely but not certain. Bond markets took it on the chin, with long-term yields increasing further, which pushed volatility higher. Though manufacturing surveys appear to be bottoming, the UK and Europe are in a deep contraction, particularly on the goods side. Equity market weakness continued, with US indices weaker than in Europe and Asia ones. We have been shifting our equity regional preferences toward Japan and taking profit in Europe.
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking.
Based in: Madrid, Spain
“This month we are going to reorganise the alternatives block and make a small adjustment in fixed income. Following the good recovery of AT1s in recent months, we are unwinding part of the position in Lazard Capital and increasing the exposure to Mutuafondo FI. We finished selling the position in Anima Star High Potential and added DNCA’s Alpha Bonds, thus introducing new sources of return and risk in alternatives block. We leave the relationship between blocks unchanged, thus maintaining a defensive structure in the portfolio at a global level.”
Kelly Prior
Investment Manager in the Multi-manager team, Colombia Threadneedle Investments.
Based in: London, UK
“It was a relatively muted month in markets as data softened and further hikes by central banks were reassessed. Soft landing is the key message being given, but investors remain on high alert. Japan lead equities overall with Eastspring Investment Japan Dynamic leading the selection, while the Berenberg European Smaller Companies fund continued to suffer as smaller companies remained out of favour. We replaced Mirabaud - UK Equity High Alpha with GVQ UK Focus with the former being effectively closed.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR.
Based in: Milan, Italy
“In September, the performance of the portfolio was negative, with Allianz Europe Equity Growth and UBS USA Growth the worst detractors. The only positive contributors were UBS Euro High Yield and Fidelity Japan Value. Interest rates have been climbing steadily and the yield curve is steepening, both in the US and Europe, taking a toll on the performance of risky assets, while investors are getting wary, and cash is king once more. We’re keeping our asset allocation unchanged for the moment, waiting to better assess the situation.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers.
Based in: Bristol, UK
“I wonder how many of us long for the days when the only decision to make was whether to be ‘risk-on’ or ‘risk-off’. The current environment requires the funding costs, cash flows, and even the viability of certain businesses to be reassessed. This should allow a portfolio of high-calibre active fund managers, blended into a sensible portfolio, to thrive. The only minor change this month is a modest switch to investment grade bonds from high yield. This reduces risk should we start to see an economic downturn and takes advantage of higher yields in longer duration bonds.”
Paul Hookway,
Senior Fund Analyst, Kleinwort Hambros.
Based in: London, UK
“In the UK, core inflation fell to 6.2 per cent in August, from 6.9 per cent in July, with the headline rate broadly unchanged at 6.7 per cent. The Bank of England paused the current rate rising cycle, though it was a close vote five to four in favour. Rate increases are working, but the lag effect is more pronounced than previous cycles. We made no changes in the portfolio, we can see upside and downside scenarios in equity markets and consider our neutral positioning the logical outcome. The implementation of the strategy is also fairly well balanced.”
Antti Saari
Chief Investment Strategist, Nordea investments.
Based in: Copenhagen, Denmark
“Equities continued to struggle in September as bond yields reached new cycle highs. Nevertheless, fundamentals are still supportive of a continued bull market in equities. New and old headwinds to the economic outlook are still present, but growth should be sufficient for earnings to improve. Inflation is moving lower, and wage growth pressures continue to abate. Investor sentiment is cautious and equity valuations are at long-term averages. All in all, this should lead to equities outperforming bonds, and we keep the recommendation to overweight equities.”
Didier Chan-Voc-Chun
Head of Multi-Management and Fund Research at Union Bancaire Privée (UBP).
Based in: London, UK
“In a global soft landing scenario, 2023 earnings estimates could well remain unchanged by the end of the year. Next year’s EPS growth estimates are probably too optimistic but this is unlikely to be a headwind for markets in coming months. The wide valuation gaps among regions, industries and stocks partly reflect the strongly diverging levels of momentum between sectors of the economy, but also the potential impacts of artificial intelligence on companies. We have increased our exposure to developed markets at the expense of emerging markets, taking profit on local currency emerging market debt.”
