Fund selection - December 2014/January 2015

Julien Mechler

Chief investment officer, AA Advisors. Based in: Paris, France

“We retain our conviction in an overweight allocation to equities but expect volatility to persist. We mitigate a portion of equity risk by reducing the equity allocation, selling Skagen Kon-Tiki and reallocating to alternative investments. We have sold IGNIS Absolute Return Government Bond RGB and bought MS Diversified Alpha Plus to add a Global Macro as a diversifier in our portfolios. Given the increasing concerns about the sustainability of the economic recovery in the eurozone and the negative momentum for value stocks, we rebalance European equity by replacing FAST Europe with the growth-biased Wellington Strategic European Equities.”

Thomas Wells

Senior Multi Manager Fund Analyst, CFA, Aviva Investors. Based in: London, UK

“October was certainly a game of two halves; having been defensively positioned in preparation for a pickup in market volatility, as promised, we used these movements to add risk. This benefited the portfolio as markets bounced back strongly. Cash has been reduced with additions to both the US tracker and our European equity managers. As indicated last month, we took the decision to halve Insight Libor Plus reflecting tight valuations in the ABS space and used the proceeds to initiate a position in Hermes Global High Yield. This fund is run by Fraser Lundie, who we regard as one of the most capable PMs in this sector.”

Silvia Tenconi

Hedge Funds & Manager Selection, Eurizon Capital. Based in: Milan, Italy

“We have decided to adopt a more cautious stance. We reduced our global funds, liquidated our position in Italian equities and sold Invesco Pan European Equity, to invest in a less pro-cyclical fund, JPM Europe Equity Plus. We liquidated UBAM NB US Value, because of its focus on the energy sector, to invest in JPM US STEEP, again with a more balanced positioning. We increased our Japan exposure, but with a hedged share class, so as not to be impacted by currency depreciation. We invested in Exane Archimedes, an equity market neutral strategy focused on European telecoms, utilities and tech sectors.”

Gary Potter and Rob Burdett

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

“There was significant volatility throughout the month as risk appetite evaporated before a rebound, driven by positive central bank comments.  It was the higher beta JPM Emerging Opps fund that performed best within the selection of funds. On the flipside the IVI European fund compounded the falls of the base market losing ground. We are switching the holding in the IVI European into the Verrazzano Advantage European fund with the latter having a more flexible mandate which we consider more appropriate for the conditions going forward. We consider the recent shake-out to be healthy but expect more volatility ahead and remain constructive on markets.”

Sebastien Bonnet

Head of Financial Engineering, FundQuest, BNP Paribas Group. Based in: Paris, France

“The abrupt sell-off in risk assets and plunge in the US and German government bond yields in early October seems to be primarily caused by events linked to liquidity and leverage issues, as opposed to a fundamental change in the global economic outlook. As such, this setback in equity markets is a long-overdue correction within a firmly bull market. The risks for this equity expansion could be the emergence of inflationary pressures in the US, leading to a sudden and disorderly adjustment in the fixed income market, and slow erosion GDP growth rates in major world economies.”

James de Bunsen

Multi-asset fund manager, Henderson Global Investors. Based in: London, UK

“We sold the Ignis Absolute Return Government Bond fund after the departure of three key members of the team. We invested in the newly launched DB Platinum IV GAM Absolute Return Europe fund, which is a market-neutral equity strategy. It has a low correlation to equity markets as all long positions are paired with offsetting short positions in the same sector or industry. Performance is derived from the relative performance of, say, BP versus Shell, and not by general market movements. This strategy has been in existence for several years as the Julius Baer Absolute Return Europe fund and this fund is simply a higher risk version.”

Bernard Aybran

CIO multi-management, Invesco. Based in: Paris, France

“The portfolio has been amended, mostly for bottom-up reasons, while the overall asset allocation of the fund was retained, without any cash holdings, and a limited duration. The changes have been made in equities, where emerging Asia holdings were trimmed, the proceeds reinvested in US markets. There, we have redeemed an actively managed fund whose style is not appropriate for the current environment, in particular due to its mid cap bias. The proceeds have been reinvested in growth mega caps. The US dollar exposure remains meaningful. European investments remain unchanged.”

Toby Vaughan

Head of Fund Management, Global Multi Asset Solutions Santander. Based in: London, UK

“Despite market turbulence, we advocate maintaining the equity allocation and exposure to other risk assets (high yield) within a balanced portfolio. The combination of deteriorating growth and inflation expectations, together with a potential policy vacuum emerging  concerned us, but this was alleviated by more proactive action from the Bank of Japan and rhetoric from the ECB. This has temporarily put a floor on assets, and we must remember that the US economic growth backdrop is solid. Within equities our preferred markets are the US and Japan, while we continue to advocate material allocations to absolute return vehicles.”

Peter Branner

Global CIO, SEB Asset Management. Based in: Stockholm, Sweden

“Due to the departure of the majority of the portfolio team at Ignis we terminated the holding in the Absolute Return Government Bond fund. A team departure is always a clear sell signal for us. We add Kames Absolute Return Bond fund, a low risk absolute return fund investing in short dated credits combined with an overlay strategy consisting of market neutral pair trades across the global government bond and credit markets. We like its low correlation characteristics and how the manager is aiming to avoid big drawdowns during challenging periods. We increase SEB High Yield and BlackRock Global Absolute Return Bond Fund.”