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
“In recent weeks, US government bond yields have risen due to the greater resilience of the US economy, the slow pace of disinflation and the need to finance public deficits. The main scenario remains a soft landing with downside risks and a plateau close to current interest rate levels. In this context, we are still targeting a moderate active risk, with a contained duration and diversification positions in European small cap equities. Exposure to global equities remains unchanged, but the regional allocation has been adjusted by reducing emerging equities and increasing US equities, mainly because of economic headwinds (US sanctions and lack of policy mix) and structural problems in China (demographics, real estate and productivity).”
Luca Dal Mas
Senior fund analyst, Aviva Investors.
Based in: London, UK
“Survey data generally headed down in their preliminary readings, surprising to the downside. This was especially the case in the UK and Eurozone, with Japan being an exception. The US readings were not as depressed, and several regional Fed surveys also improved. While inflationary pressures continue to moderate, wage pressures remain strong. Equity markets globally were generally weaker during August, falling during the first half, to partially recover later on. We have trimmed our European exposure, expecting more uncertainty building around the local macro and earning picture, while we remain constructive in the US — especially when compared to emerging markets.“
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking.
Based in: Madrid, Spain
“We ended the summer season with some changes to the composition of our portfolio. At the Asset Allocation level, we reduced the weight of the alternatives block by 25 per cent and split it between fixed income and equities. The current attractive yield levels in fixed income and new opportunities in emerging equities lead us to reduce weighting in alternatives, which has not performed in 2023. On the other hand, we took advantage of the departure of the Fidelity Global Financial Services manager to unwind the position in global financials and open a new position in global energy equities.”
Kelly Prior
Investment Manager in the Multi-manager team, Colombia Threadneedle Investments.
Based in: London, UK
“August proved to be anything but quiet as sentiment gyrated, driven by choppy soft and hard landing narratives impacting the view of short-term interest rate expectations. Cracks in the veneer of the service sector caused a late reversal of fortunes in the bond market, which suffered through most of August. Markets were generally weak, with emerging markets and Asia lagging, though the Berenberg European Small Cap fund was the worst performer of the selection, reflecting the general absence of interest globally down the cap spectrum. Conversely, a meagre but positive return saw the Iguana Investments Long/Short Equity fund tops the table.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR.
Based in: Milan, Italy
“In August the performance of the portfolio was negative, with Lyxor MSCI China UCITS ETF and Allianz Europe Equity Growth being the worst detractors. We switched from Lord Abbett High Yield to UBS Euro High Yield, to get a higher quality exposure in credit, and sold Baillie Gifford Japanese Equity to invest in Fidelity Japan Value Fund, considering the normalising inflation environment in Japan. The Fed and the ECB have clearly moved to a data-dependent strategy and markets are in wait-and-see mode, accordingly. We keep our asset allocation unchanged.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers.
Based in: Bristol, UK
“August saw volatility across global markets. I suspect this was as much because many investors were on their summer as it was to do with any specific news. However, it seems to have dawned on people that while we might be near the peak for inflation and interest rates, the path back down is likely to be slower than the path up, and the days of ultra-low rates are probably long gone. I suspect we’ll see further volatility ahead as economies continue to digest the impact of sharply higher rates. I’m happy with the overall balance of the portfolio, so from here it’s a case of keeping an eye out for tactical opportunities.”
Paul Hookway,
Senior Fund Analyst, Kleinwort Hambros.
Based in: London, UK
“In the UK, core inflation remained at 6.9 per cent in July, compared to the US where it fell modestly to 4.7 per cent. The UK is still suffering from high wage inflation at 8.2 per cent, though food inflation slowed, and energy inflation was –7.8 per cent. We await the next meetings of the Fed and Bank of England, after August’s inflation data in the coming weeks. While our allocation is broadly unchanged, we have reduced the UK and European exposure to increase the US allocation, adding a new holding of the Loomis Sayles US Growth Equity fund. This has a quality/growth bias with a strong valuation discipline, making it an attractive investment.”
Antti Saari
Chief Investment Strategist, Nordea investments.
Based in: Copenhagen, Denmark
“We have been expecting a pause in the risk asset rally for some months, and in August we finally got the first meaningful selloff since mid-March. After being stretched, sentiment is now back at neutral. Economic activity remains resilient, tailwinds have strengthened and the economic outlook has brightened. Inflation has continued to surprise positively, and the US economy has proven more resilient to higher rates than many expected. The end of the rate-hiking cycle is coming closer and a soft landing seems to be within reach. Looking ahead, earnings growth is expected to pick up; we think the tide has turned and recommend investors to overweight equities over fixed income investments.”
Didier Chan-Voc-Chun
Head of Multi-Management and Fund Research at Union Bancaire Privée (UBP).
Based in: London, UK
“We saw a ‘bad news is good news” investor attitude as deteriorating US labour data increased market expectations that the Fed will not hike its rates in September and in November. Equity markets posted losses in August, as did Global Aggregate on the fixed income side. A release of liquidity trapped in the Fed’s own reverse repo facility posed an upside risk to global liquidity flows and, by extension, to global equity markets, which have been powered by central bank liquidity injections since the autumn of 2022. Emerging markets underperformed developed markets, with China remaining under significant pressure. We maintained our selective stance on quality equities, increased duration at the expense of spread exposure, and kept the equity allocation unchanged.”
