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
“Leading indicators showed that the gap between services and manufacturing had widened further. Some macroeconomic data in Europe confirmed a slight deceleration in the economy. Nevertheless, consumer spending remained strong, headline inflation showed signs of slowing and the labour market remained robust. In this context, we are still targeting a moderate active risk. The global asset allocation follows a balanced approach. We stay neutral on US and European equities, with diversification positions in European small-cap equities strategies and Emerging markets. The alternative bucket has been slightly reduced in favour of fixed-income strategies, but the overall duration remains moderate.”
Luca Dal Mas
Senior fund analyst, Aviva Investors. Based in: London, UK
“Towards the end of the month, we experienced a tentative coup in Russia by the Wagner military group, but the response in financial markets has been muted. On the economic front, early survey data showed further deterioration in manufacturing, with all major economies at a level consistent with a manufacturing recession. The services sector also slowed in all major regions bar the US, but remains in generally good health. Central banks in Europe continued to tighten, with the Bank of England leading with an increase of 50 basis points, following recent upside surprises in wages and inflation. In portfolios, given our underwhelming outlook for China, we continue to reduce our exposure to emerging markets in favour of US and European Equities.”
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking. Based in: Madrid, Spain
“We haven’t made significant changes at the asset allocation level this month, but we have made a change in the fixed-income block, looking for some longer duration and increasing the portfolio rating. By entering an index fund that replicates the JPM Global Government Bond Index, we achieve this double objective. This month, there are no changes in the structure of the equity and alternative blocks.”
Kelly Prior
Investment Manager in the Multi-manager team, Colombia Threadneedle Investments. Based in: London, UK
“Economic growth forecasts painted a rosier picture for the world in the month, as the Federal Reserve paused its interest rate hiking to wait for more data before resuming — which they are likely to do, given the most recent numbers suggesting strength in wages and employment. Equity markets rose, with the US taking the lead, though in reality this was a return to large-cap growth tech domination, with government bonds faltering. Despite this, it was the Magallanes Value Investors European Equity fund that topped the performance table with the Janus Henderson Horizon Strategic Bond Fund EUR floundering, thanks to its high sensitivity to interest rates through its long duration positioning. We switched the Jupiter UK Specialist Equity Fund for the HL European market Neutral EUR fund.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR. Based in: Milan, Italy
“In June, the performance of the portfolio was positive. Pretty much all of our equity funds posted positive results, and Lord Abbett High Yield contributed positively to performance. We keep our asset allocation unchanged for the time being, waiting for the main central banks (the Fed and the European Central Bank) to pause and rates to stabilise before investing into government and investment grade bonds. Emerging debt is still too risky for now, albeit yields are becoming interesting again.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers. Based in: Bristol, UK
“It’s interesting how strong stock markets have been in the first half of the year, despite persistent inflation and possible recession. Equity investors have taken comfort from strong labour markets and high excess savings. Bond investors, on the other hand, worry about stubborn inflation and interest rates being higher for longer. Who is right? It’s hard to believe higher rates won’t bite, in the UK at least, as more fixed-rate mortgages end, and the era of ultra-low rates is consigned to history. A defensive tilt to a portfolio doesn’t seem outrageous with this backdrop, but on a long-term view, the current yields on bonds and some stock markets are difficult to ignore.”
Paul Hookway,
Senior Fund Analyst, Kleinwort Hambros. Based in: London, UK
“Despite the fact that Fed paused its rate-rising program, the Bank of England raised rates by 0.50 per cent in June, driven by core inflation rising in May. The portfolio benefited from strong returns from its US allocation, in particular iShares S&P 500 Equal weight ETF and Robeco US Premium Equities. We made no changes to the broad allocation in the fund, but we did switch the Tail Risk Protection Note into a new holding of Moorea Defined Return which invests in a range of structure products, exploiting a range of opportunities.”
Antti Saari
Chief Investment Strategist, Nordea investments. Based in: Copenhagen, Denmark
“The economic picture has brightened and there are signs that the US central bank may succeed in reducing inflationary pressure without a hard landing in the economy. We maintain our neutral allocation between equities and bonds. There is still uncertainty about how the interest rate increases will affect the economy and earnings. Together with the risk of a short-term correction emanating from a rapid increase in investor optimism, this suggests a somewhat cautious approach. With higher interest rates, bonds are a far more attractive alternative than we are used to. That also contributes to our neutral allocation between equities and bonds. Moreover, we find risk-taking within the bond portfolio more attractive and therefore overweight Emerging Market Bonds and European Investment Grade Corporate Bonds.”
Didier Chan-Voc-Chun
Head of Multi-Management and Fund Research at Union Bancaire Privée (UBP). Based in: London, UK
“Equity markets rallied strongly, despite an unhelpful economic environment. In the US, figures were mixed. Sentiment in the manufacturing sector remained negative, although improving slightly in some regions. However, confidence in the service sector worsened and weekly initial jobless claims rose steadily during the month. On the plus side, job creation remained very strong in May and core inflation (excluding energy and food) fell, while remaining elevated at 5.3 per cent. The decline had a positive impact on consumer confidence. In addition, despite high borrowing rates, activity in the housing sector rebounded, with demand spurred on by lower prices especially. Our selective stance on quality equities remains. We increased duration at the expense of spread exposure. Equity exposure remains unchanged.”
