Fund selection - May 2015

Julien Mechler

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

“Following recent upward movements, equity markets could be seen as showing high valuations and therefore potentially expensive. Nevertheless the environment with low volatility and low inflation remains positive. In particular, European quantitative easing and the weakness of the euro, together with low oil prices, will represent tailwinds for the recovery. So we keep our allocation unchanged, with an overweight of equities versus bond. Within the fixed income field  we redeemed our most defensive position, M&G Optimal Income, to increase our two other lines, as well as Marshall Wace in alternatives.”

Thomas Wells 

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

“As the chocolate-induced sugar rush fades with the passing of Easter, one naturally becomes more reflective. Portfolio performance year to date has been strong, benefiting from our large equity overweight to both Europe and Japan. On top of this, our managers have delivered consistent levels of alpha. We have made no portfolio changes this month, however valuations across the board are beginning to look stretched. In time we would expect to reflect this more cautious stance through increases to both our cash and alternatives allocations.”

Silvia Tenconi

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

“Equity markets posted mixed returns in March, with the S&P returning negative numbers. Nonetheless, the contribution from our US Equity Funds was positive thanks to their exposure to the dollar. Our yen exposure was beneficial as well. All the funds in had positive returns, the best being Vanguard US Opportunities, Robeco US Select Opportunities and Jupiter European Growth. This month’s laggards were Nordea European High Yield and Exane Archimedes. We did not implement any changes to the portfolio in the month and still prefer equities, high yield and alternatives to government bonds and cash.”

Gary Potter and Rob Burdett

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

“Most equity markets gained ground in March, with Japan leading the pack. The weakening euro was also a significant tailwind for returns. QE started in Europe and US policymakers somewhat allayed fears of an imminent rate rise, causing risk assets to rally, though the forthcoming election in the UK held back returns here. Our best performer was the Blackrock Asian Leaders fund, benefiting from its heavy China exposure. The F&C High Income bond fund fared the worst posting negative returns as higher risk bond markets marked time. We expect volatility will remain a feature of 2015 and remain vigilant for any opportunities this may present.”

Sebastien Bonnet

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

“We remain positive on equities, European high yield and European real estate. We think the global growth cycles are positive for equities. Monetary easing in China, quantitative easing in the eurozone and Japan, and the Fed’s cautiousness of hiking US interest rates too soon or aggressively, are also beneficial, in our view. ECB asset purchases are actively crowding out investors in an environment of shrinking fixed income net supply. From that perspective, the ECB’s QE programme could have a powerful effect, creating a scarcity premium for euro fixed-income instruments. We overweight high yield bonds to benefit from a positive carry.”

Peter Haynes

Investment Director, SGPB Hambros. Based in: London, UK

“Equity markets provided mixed returns during the month with investor sentiment continuing to be dominated by potential monetary policy tightening in the US. The upturn in European economic data provided further fuel to the equity market rally in the region which outperformed other developed market indices. US equities remained subdued as the continued strength of the US dollar negatively impacted the profits of exporting companies. Within the strategy we are mindful of potential political risks in the UK market and have reduced the UK equity exposure and increased our existing positions in Europe, Asia and Japan.”

Bernard Aybran

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

“During March, the fixed income and equity investments remained close to equally weighted, which means the risk sources are biased towards stockmarkets. While one fixed income global portfolio was sold, it has been replaced by a European fund dedicated to financial subordinated, which remains one of the very few sources of yield in the euro-denominated markets. Overall, the FX exposure has been trimmed somewhat, though it remains meaningful, acting as a cushion against forthcoming bouts of risk aversion. The equity investment remain biased in favor of Europe and emerging Asia.”

Toby Vaughan 

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

“We maintain an almost 50 per cent allocation to equity markets. Outside of the UK we prefer European and Japanese equities to the US given that both remain more attractive due to improving economic and corporate momentum – and a more supportive policy environment. Fixed income allocations are controlled due to the lack of return potential, and despite the low yield we maintain moderate allocations to traditional corporate bonds due to their diversification qualities. To manage risk we switched the high yield allocation from a European to a more global approach, and added Henderson UK Absolute Return to diversify further.”

Peter Branner

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

“Our fixed income portfolio continues to perform well in a climate with continuously falling rates but alternatives are always considered. In a portfolio context, trend following strategies (CTAs) are a good component as they typically have exposure to the better performing asset classes when trends are consistent and strong. History supports this argument as an allocation to CTAs can increase the risk-adjusted returns of a portfolio despite a lower Sharpe ratio than many other hedge fund strategies. We include SEB Asset Selection which has the longest and one of the strongest track-records in the CTA industry.”