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
“Macroeconomic data and earning figures suggest a soft landing. Global activity is decelerating slowly and nearing contraction levels. The probability of a hard landing scenario in Europe decreases as energy prices fall. Central banks are trying to prevent markets from expecting too much easing of monetary conditions, while US inflation has been peaking for a few months. In this context, we prefer to maintain a moderate active risk, waiting for a confirmation of limited downside risk on earnings. We keep a neutral allocation on risky assets: neutral on US stocks strategies and underweight on European equities with a position in European high yield.”
Luca Dal Mas
Senior fund analyst, Aviva Investors. Based in: London, UK
“Central banks continue with their tighter monetary policy, with Fed, European Central Bank and Bank of England all delivering rate hikes of 50 basis points. This stance is deliberately leading to lower growth. Preliminary survey data confirmed that a coordinated downturn is underway around the world, but also offered some hints that recessions may be mild by historical standards. December was a weak month for most equity markets, with US technology names suffering the most, while Chinese stocks were supported by the decision to stop the local zero-Covid policy. In portfolios we maintain our mild conservative bias, dictated by the lack of visibility around the magnitude of the expected earnings decline.”
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking. Based in: Madrid, Spain
“We started in 2023 in the same way as we ended 2022 — maintaining a prudent position in the portfolio and favouring defensive and conservative strategies in all areas. There are still many uncertainties, and many of the risks that we saw in 2022 are still present in one way or another. We have slightly increased the duration of the portfolio in fixed income, where the current levels of internal rate of return interest us in the medium term. We made no changes in equities, where we are comfortable with a low level of exposure.”
Kelly Prior
Investment Manager in the Multi-manager team, Colombia Threadneedle Investments. Based in: London, UK
“Unfortunately, 2022 ended with no Santa rally as markets faltered. This was led by the US, in the face of interest rate hikes from the major central banks of the world, and a reopened China where Covid seemed set to blast through the population. Reported inflation, while moderating, remains high, and it’s worth noting that December is a notoriously volatile month in terms of liquidity. Currencies continued to act as the release valve as the yen strengthened while the dollar waned. We observed a whiff of policy change, buoyed the Topix, along with the LF Morant Wright Japan fund as the only one of the selection to make positive ground in the month. But once again, Spyglass IS Growth fund remained firmly at the bottom of the pack.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR. Based in: Milan, Italy
“In December, the performance of the portfolio was negative, with the only positive contribution coming from Lyxor MSCI China UCITS ETF, thanks to a turnaround in Beijing’s zero-Covid policy. Equity markets were under pressure again, with interest rates rising materially in Europe and the dollar declining versus pretty much all the other currencies. Credit spreads were mainly unchanged in Europe and a touch higher in the US. We keep our allocation unchanged, but the time is coming to consider government and investment-grade bonds as interesting asset classes once again.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers. Based in: Bristol, UK
“There weren’t many placed to hide last year, but it was good to see Man GLG Japan CoreAlpha perform well, with a return approaching 17 per cent. Pyrford Global Total Return, with its defensive positioning, also finished the year with a modest positive return. At the other end of the spectrum, UK smaller companies were hit hard. With the risk of a recession in 2023 well-flagged, a lot of bad news for small caps could be priced in. Even though further falls can’t be ruled out, I’m happy with a small investment given the long-term growth potential small caps offer.”
Paul Hookway,
Senior Fund Analyst, Kleinwort Hambros. Based in: London, UK
“Markets retreated in December, giving back some of November’s strong gains. The positive sentiment evaporated as rates continued to rise on both sides of the Atlantic, though the pace had slowed. The only change we made was to reduce our duration positioning within our government bond positioning, by switching from the Lyxor FTSE Actuaries UK Gilts ETF to the Lyxor FTSE Actuaries 0–5-year UK Gilts ETF. We are not yet in a recession, but we will soon be. The market volatility will generate opportunities, which we have plenty of dry powder to exploit.”
Antti Saari
Chief Investment Strategist, Nordea investments. Based in: Copenhagen, Denmark
“The rally in bonds and equities since early October reversed last month, after hawkish comments from the Fed and the ECB. Both moderated their pace of rate hikes, as expected, but also went to great lengths to communicate that this did not signal an upcoming pause. A cocktail of central banks that seem very committed to fighting inflation, and economic data coming in over the next couple of months, could lead to elevated bond yields providing headwinds for equities. We therefore stick to our neutral weighting between equities and bonds. However, we find good value for the added risk within bonds and therefore recommend an overweight in both emerging market and European investment grade bonds.”
Didier Chan-Voc-Chun
Head of Multi-Management and Fund Research at Union Bancaire Privée (UBP). Based in: London, UK
“After a strong November for equities, December saw global developed markets (DM) suffering more than emerging markets (EM), which were only slightly down in US dollar terms. Global equity markets were negatively driven by underperforming US equities. We slightly increased our allocation to EM, both in equities and fixed income. In the latter, we allocated to local EM currency. A weaker dollar continues to offer attractive entry levels. Asian high-yield spreads narrowed more than their global peers in December. GDP-weighted inflation cooled in the final quarter of 2022, although it remains above its 10-year average. Against this backdrop, most central banks will continue to hike rates into the first quarter of 2023, before pausing. That should be supportive of a more constructive macro environment relative to DM.”
