Fund Selection - May 2014

Julien Mechler

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

“The Ukrainian crisis brought volatility to financial markets, which eventually managed to weather the storm and regain stability. On the macro side we continue to think this year’s US industrial output will be underpinned by a sharp increase in final domestic demand growth. This will be supportive for value-orientated strategies and especially the ones combining a search for value with the aim of investing in high quality companies. This is the investment philosophy of AA MMF Aristotle US Equities. So we increased our exposure to this fund, at the expenses of the holdings we have in Alger American Asset Growth.”

Peter Fitzgerald

Head of Multi-Assets, Aviva Investors. Based in: London, UK

“We remain overweight equities, underweight fixed income and overweight cash. Within equities we are still underweight emerging markets. We continue to monitor this position carefully. We have retained our relatively high cash position to offset our above average equity allocation. The overweight position in European equities has continued to perform well while emerging Europe and Japan have hindered returns. We continue to believe Japan offers the potential for high returns and retain for the moment our small position in emerging Europe on valuation and sentiment grounds. It is relatively cheap and everyone dislikes the region.”

Christian Jost

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

“Our portfolio, which is allocated according to C-Quadrat Flexible Assets AMI, tries to benefit from the diversification effects of a sizeable multi-asset investment universe. Within a portfolio optimised risk/return profile we minimised the emerging markets bonds exposure and increased the high yield bonds to almost 8.25 per cent. Almost 26.5 per cent of the portfolio is allocated in government, corporate and high yield bonds. We sold our commodities exposure in gold and silver ETCs and bought European utilities. Almost 33.5 per cent of the portfolio is allocated within Europe in small and large caps, real estate and sectors. The fund’s year-to-date performance is 1.13 per cent.”

Management selection team

Eurizon Capital. Based in: Milan, Italy

“While the absolute performance of the portfolio is still up 0.97 per cent since the beginning of the year, we underperformed our benchmark by 75 bps this month. Our long positions in equities and high yield were detrimental, since the best performing asset were European government bonds. Our position in European equities was detrimental as well, with the allocation to Italian equities only slightly improving the overall result. Best contributors were M&G Global Dividend and Robeco US Opportunities. The worst contributors were Wells Fargo US All Cap Growth and Templeton Mutual European.”

Gary Potter and Rob Burdett

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

“Asia and emerging markets led equities in the month following a change in sentiment, which tempted investors into these previously underperforming areas. This was despite weakening headline figures from China. The JPM Emerging Opportunities fund reflected this as the best performer of our selection. Comments from the Chair of the US Federal Reserve suggesting interest rates could be rising marginally ahead of expectations caused an adjustment in bond pricing to reflect the new timetable, but US equities continued to make positive ground, albeit marginally despite this. On the flipside, UK equities were the underperformers of the period.”

Sebastien Bonnet

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

“Geopolitical issues, including the events in Crimea, overshadowed economic data in March. The Fed continued to taper its asset purchases and in the eurozone the recovery remained tentative. The slowdown in China has been a concern in recent weeks. We still favour a positive exposure to risk, monetary policies being extremely stimulative in a low inflation environment. Global equities, European high yield, European real estate and short duration German bunds are overweighted. We have taken our profits on US real estate and rotated to European property where we anticipate an improvement in fundamentals.”

James de Bunsen

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

“We used the recent sell-off in gold to top up our holding in the precious metal. We believe it remains a useful hedge against geopolitical risks, potential quantitative easing in Europe and inflation elsewhere. We also switched our Japanese equity fund into an unhedged share class, thereby taking on Japanese yen exposure. The Bank of Japan currently seems reluctant to accelerate its pace of bond purchases and thereby weaken the currency. The yen also serves as a good offset to falling equity prices, as it tends to strengthen during bouts of risk aversion.”

Bernard Aybran

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

“The alternative component of the balanced portfolio has been concentrated into three funds. Reducing the structural long duration of the portfolio was part of the investment rationale: as all main interest rates decreased meaningfully during the month, allocating more capital to the more nimble funds made sense. The fixed income and equity holdings in portfolio have been kept unchanged, despite some nascent changes in the underlying market trends. If the recent rebound in emerging assets proves sustainable, this could lead to more changes in the portfolio.”

Peter Branner

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

“We introduce PSAM, a hedge fund with an event driven style. PSAM was founded in 1997 by Peter Schoenfeld, his industry background dates all the way back to 1972 and he is still lead portfolio manager of the fund. Event driven strategies can be risky business. Consequently it is comforting that PSAM represents long market presence and experience. Being through several periods of market turmoil and drawdowns, PSAM has stayed true to their philosophy and has delivered stellar risk-adjusted returns for more than 17 years. We add the fund at an initial position of 5 per cent and reduce one of our bond funds to finance the new position.”