Fund selection - January 2017

Giovanni Becchere 

Head of Multi-Assets, ABN AMRO Investment Solutions. Based in: Paris, France

“We continue to prefer equities over bonds. Improving macroeconomic conditions are supporting equity markets, combined with an upward trend of earnings revisions. Market events, such as the election of Donald Trump and the Italian referendum, have been received positively by markets. Central banks also remain accommodative. Even when interest rates are raised off their current lows, rising rates will be coupled by improving economic growth. In the portfolio we increase exposure to the value oriented AA MMF Pzena European Equities while reducing the growth oriented Wellington Strategic European Equities as, in Europe, we see the continuation of the transition from a growth cycle to a value cycle. Value stocks remain no-expensive even after a strong rally and benefit from positive momentum and better fundamentals like activity growth, recovery of earnings and steepening of the yield curve.”

Thomas Wells 

Fund Manager, Multi-assets Aviva Investors. Based in: London, UK

“The value tilt of the equity book continued to deliver super-normal performance in December resulting in a very strong year-end for the portfolio. This is exemplified by GLG Japan which returned more than 35 per cent (in euros) in the last six months. Given how far we have travelled and that the style nature of GLG Japan means that it tends to have lumpy returns, we decided to halve our position. We used the proceeds to invest into Baillie Gifford Japan, a growth manager, creating a more style neutral proposition.”

Gary Potter and Rob Burdett

Co-heads of multi-management, BMO Global Asset Management. Based in: London, UK

“The much expected increase in Fed Funds rate by 25bp to 75bp, and defeat by Prime Minister Matteo Renzi in the Italian referendum on constitutional reform failed to dampen spirits in markets which continued to make positive grounds in December. Europe saw the strongest moves with the market returns reflected in the performance of the Memnon European Fund as the best performer of the selection. On the flipside the Odey Absolute fund lost ground. Currency volatility was notably absent relative to recent times. 2016 has been a remarkable year in both political event and market returns. Markets on the whole seem fully valued, but there is always scope for opportunity in selected markets. We remain vigilant to take advantage of any volatility that may present itself.”

Silvia Tenconi

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

“The portfolio ended the month with a positive performance. The main contributors were M&G Global Dividend, Schroder European Opportunities and MFS Global Equity. We are positive on equities and find bonds even less appealing than before. Credit had a fabulous 2016 and it is starting to look fairly priced. We are changing the portfolio: halving our US high yield exposure and selling out of our Euro high yield position. We are buying equities: adding Eastspring Japan Dynamic Fund and Exane Equity Select Europe, increasing JP Morgan Europe Equity Plus, Schroder European Opportunities and Robeco US Select Opportunities.”

Jean-Marie Piriou

Head of quantitative analysis, FundQuest Advisor, BNP Paribas Group. Based in: Paris, France

“Despite an unfavourable start to 2016, equity markets continued to rally until the end of the year. A number of positive factors have been observed during the year, such as fiscal stimulus in the US and better-than- expected data releases. Even if we must remain cautious, we maintain our views on the necessity of some risk assets in the portfolio. In this perspective, we have introduced a more aggressive fund within the fixed income  selection of the portfolio.”

Peter Haynes

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

“The US equity market continued to rally in December and pulled other markets along with it. Against a background of higher growth and inflation expectations, developed market equities continued to outperform bonds during the month, particularly in the US. In the UK the equity market responded to improved prospects in the energy, mining and financial sectors. Within the portfolio, we expect the positive momentum to continue in the short term and have reduced the cash position in favour of un-hedged US equities. Fund performance was positive across the board within the equity allocation with JO Hambro Continental Europe particularly strong.”

Bernard Aybran

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

“Over the month of December, the style rotation initiated earlier in the quarter has been increased in the European equity investments, an area where the changes of market leadership have been quite abrupt. Against this background, a fund that has been in the portfolio for quite a while has been redeemed and the proceeds re-invested with a more pragmatic, less structurally-biased manager. For asset allocation reasons the remaining gold mine stocks have been redeemed to allow for an increased investment in US-listed stocks and European-listed real estate, whose performance has been hurt by rising rates.”

Lee Gardhouse 

Chief Investment Officer, Hargreaves Lansdown Fund Managers, Based in: Bristol, UK

“One of my favourite quotes about the market is that it ‘moves in a way to cause the most amount of pain to the greatest number of market participants’. From what I see and hear investors in the main are pessimistic and underinvested in risk assets. This year’s Santa rally proved to be a sting in the tail for anyone who is waiting on the sidelines for a big market setback. I run this portfolio fully invested and do not intend to move into cash. As such the market has been kind to us in December delivering positive returns across the board. Japan, having been our best performer for several months, has been less exciting due to yen weakness but our UK managers, particularly those with a small and mid cap bias, have added significant value to the portfolio. Our one area of caution, the US, has seen significant strength since the election but given the depth and breadth of this market as well as the cautious approach of our chosen manager leaves us comfortable taking a long-term view here. We look forward to 2017 given the ongoing pessimism.”

Peter Branner

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

“Artisan Global Value determines the intrinsic value of a business and invests at a significant discount. The fund solely invests in value companies with high or improving returns on capital in combination with strong financials and therefore has predictable future cash flows. The PM, Daniel O’Keefe, stresses the fact that the term ‘growth’ is a characteristic and ‘value’ is a judgement, of a price and what a company is actually worth. Therefore growth serves as the ultimate hedge against investing into value traps. We also increase the weighting to this fund in the portfolio as we predict low alpha correlation to the other equity funds due to its different investment style.”