Fund Selection - November 2013

Graham Duce

Co-head of UK multi- manager funds, Aberdeen Asset Managers. Based in London, UK

“While the eurozone economic picture remains blurred, growth headwinds appear to be diminishing. Against this backdrop the ECB could positively surprise the markets after a period of contraction of its balance sheet. We continue to warm to European equities from a relative valuation perspective and indeed European markets are trading at a discount to global markets. In addition, European bourses have lagged the US equity market over the last three years. We take some profit from the US allocation and add to our position in the Henderson European Special Situations Fund.”

Peter Fitzgerald

Head of Multi-Asset Retail Funds, Aviva investors, Based in: London, UK

“We have been nervous about emerging markets all year and remain so but when prices fall, one must reappraise the situation.  We do not allocate to global emerging market funds as we prefer to allocate to the different regions and we have used the recent falls in valuations to add to our existing holdings.  In addition to this we have switched our holding in First State Asia Pacific Leaders to Indus Asia Select. We believe Indus offer a compelling fund run by an experienced manager who can leverage on the resources normally only available to a hedge fund.”

Christian Jost,

Executive director and chief investment officer, C-Quadrat Kapitalanlage AG, Based in: Vienna, Austria

“C-Quadrat Flexible Assets AMI tries to benefit from the diversification effects of a sizeable multi-asset investment universe. The fund’s allocation has been geared to a predefined investment risk (with a risk corridor from 2  to 6.50 per cent volatility), with a current risk profile of almost 4.17 per cent. Within our bond portfolio we sold long-term global sovereign bonds and increased our exposure within the euro sovereign bonds with a short duration. On the risky asset allocation side we kept our European large caps equities and global large caps equities exposure at around 12 per cent.”

Management selection team

Eurizon Capital, Based in: Milan, Italy

“In September there were no changes to the portfolio, which outperformed its benchmark. The overweight in equities was a positive contributor, as was the overweight in European high yield and the underweight in government bonds. Our US equities funds did well, with Vanguard US Opportunities, UBAM NB US Value and EDRAM US Value and Yield all outperforming the S&P 500. Good performance came from Invesco Pan European Equity, while all the other European equities funds lagged their markets. Top absolute contributors for the month were Natixis Global Value, Invesco Pan European Equity and Templeton Mutual European.”

Gary Potter and Rob Burdett

Co-heads of multi-management, F&C investments, Based in: London, UK

“More positive statistics from the Chinese economy provided the fuel markets needed to resume their upward trajectory, with Angela Merkel’s reappointment also providing a boost. Japan led the upward move, with Europe close behind. The euro weakened against sterling, but strengthened against the dollar and yen, with the Morant Wright Japan fund our best performer. The Fed’s decision not to cut QE caused bond funds taking positions against tightening yields, such as the F&C Macro, to suffer. We are conscious of issues such as the political deadlock in the US being able to dominate short-term volatility but are cautiously optimistic over the longer term.”

Thierry Creno

Local Head France, Global Balanced Solutions FundQuest, BNP Paribas Group, Based in: Paris, France

“A sharp rebound followed the Fed’s decision not to taper its QE and the several positive (geo) political developments such as the German elections and situation in Syria. But investors’ enthusiasm quickly faded over the US budget negotiations. This environment of rebounding equity and declining yields has been positive for our portfolio. We keep our positions unchanged and continue to favour European and emerging markets at the expense of the US within equity, while fixed income investments remain limited and include emerging debt in US dollars. This allows us to run a significant exposure on absolute return strategies as cash is not attractive.”

Lionel De Broux

Manager selection specialist, IPCM, ING Private Management, Based in: Luxembourg

“October was highly positive for the strategy. The fund picking succeeded to provide strong alpha, particularly due to the rebound of our different hedge funds. In addition, the performance has been supported by the preference for absolute return strategies over long only fixed income and the over exposure to US smaller companies. We maintain our cautious view on traditional fixed income, as we expect higher volatility for the asset class and are considering, for Q4, to reallocate part of our emerging markets allocation to the US.”

Bernard Aybran

Head of manager selection, Invesco, Based in: Paris, France

“The balanced portfolio keeps focusing the equity allocation on weathered stockpickers, with an emphasis on Europe. As has been the case for many years, Europe is where active fund managers can add value on a regular basis, which is somewhat contrary to the ‘efficient market hypothesis’ but probably goes to show European markets are not that efficient. Similarly, a meaningful part of the US equity exposure comes through an ETF, as US stockmarkets are much better arbitraged. A meaningful small cap investment has been initiated, as it decreases the overall correlation with major markets.”

Peter Branner

Global CIO, SEB Asset management, Based in: Stockholm, Sweden

"During 2013 we have been worried about the returns in the CTA space and specifically about funds with large risk allocation to trend-following models. New regulation is pushing CTA managers to reinvent their fund structure and they are now offering less predictability and transparency to investors. We sell our Aspect position and keep GAM who have less risk allocated to trend-following signals. We reinvest the capital in Blackrock EDEAR, which is trading long/short equities with a disciplined market neutral approach. We believe they can add value with their wide range of systematic equity strategies and they have a strong team behind their investment process.”