Fund selection - July/August 2013

Graham Duce

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

“Japanese equities have entered bear market territory. There has been an element of profit taking combined with concerns that Abenomics will not sufficiently reflate the economy. We see the recent retreat as an opportunity to top  up our position in the GLG Japan Fund. The Japanese equity market is one of the few markets enjoying positive earnings momentum and valuations are still supportive when compared to historic levels. While we see little by way of official announcements in the run up to the Upper House elections in July, we may just be pleasantly surprised by policy actions post the elections as expectations are currently low.”

Peter Fitzgerald

Senior portfolio manager, multi-asset Multi-Manager, aviva investors

Based in: London, UK

“We sold our small position in gold during the month and increased our allocation to equities. One must recognise when an investment is not working and take steps to address this. Given the accommodative monetary policies and macro economic uncertainty one could have expected gold to perform better. It has not and when an investment fails to perform as expected, it is generally prudent to sell and move on rather than seek retrospective explanations.  We continue to believe that equities offer better absolute returns and also risk adjusted returns than bonds and have increased our positions.”

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 current risk profile of almost 4 per cent. We have been reducing parts of our risky exposure, high yield bonds and small caps Europe, and increasing the short-term eurozone government bonds exposure. At the moment we maintain 44.25 per cent in government and sovereign bonds and money market, 18 per cent in high yield and inflation linked bonds, 28.5 per cent in developed equity markets, 5.25 per cent in property equities and 4 per cent in alternative strategies.”

Management selection team

Eurizon Capital

Based in: Milan, Italy

“We reduced our equity exposure, closing our long position on emerging markets and putting the proceeds in a cash fund. The portfolio remains overweight equities, overweight European investment grade credit and underweight Euro government bonds. The overweight in equities versus government bonds gave a positive contribution and off-benchmark exposure to European investment grade credit was also beneficial. Given the lackluster evolution of macro fundamentals for the Asian region and emerging markets in general, we decided to close our overweight and to stay cash for a while.”

Gary Potter and Rob Burdett

Co-heads of multi-management, F&C investments

Based in: London, UK

“The implication of quantitative easing coming to an end combined with weak Chinese economic data was enough to halt the spectacular run of recent times mid-month and cause markets to retreat. However, only Japanese and Asian equities made negative returns on the month as a whole, with bonds also giving back some ground. We have switched into the BGF Continental European Flexible fund and replaced the Tiburon Taipan fund with BGF Asian Growth Leaders. The Morant Wright Japanese fund was the worst performer. This bout of volatility has been expected and we believe it will continue over the summer months. However, we remain positive into the year-end.”

Thierry Creno

Local Head France, Global Balanced Solutions FundQuest, BNP Paribas Group

Based in: Paris, France

“With uncertainties around the Fed’s policy, markets have started to correct their rising trend on all markets. Despite its moderate risk profile, our portfolio is suffering in such an environment. As we consider a removal of quantitative easing measures would be premature and do not expect the Fed to act before 2014 on the back of more robust growth, we view the recent moves as a correction and keep the current allocation broadly unchanged. We selectively add an opportunistic investment and introduce Morgan Stanley US Property at the expense of our US equity blend exposure (Alliance Bernstein Select US Equity).”

Lionel De Broux

Manager selection specialist, IPCM, ING Private Management

Based in: Luxembourg

“The model portfolio performed quite well during the month of May, with nice returns compared to a balanced benchmark. Most of the equity funds were strong contributors to this result, in addition to our bets on US smaller caps. The preference of balanced products versus dedicated bond allocation was also well rewarded. The alternative pocket was mixed, DB Systematic Alpha has given back part of the strong return generated since the beginning of the year, but that correction was offset by the good performance posted by Henderson UK Abs Ret. We maintain our funds mix and asset allocation unchanged.”

Bernard Aybran

Head of manager selection, Invesco

Based in: Paris, France

“For the second month in a row, the movements in May have been about asset allocation, much more than security selection. Overall, there’s only been a minor switch, increasing the equity holdings by 2.5 per cent at the expense of the fixed income investment. But, under the surface, the meaningful changes has been to redeem the external emerging into the local currency, and focus the equity portfolio more on US holdings, still remaining out of emerging stocks. From a fund selection perspective, the new emerging debt holding is an ETF as, for now, it might be held only for a short period.”

Peter Branner

Global CIO, SEB Asset management

Based in: Stockholm, Sweden

“This month we deploy our risk budget more in the absolute space. We increase Ignis, an absolute return fixed income fund, which is not exposed to credit risks but has the mandate to exploit the full opportunity set in the government bond market independent of where yields go. At the same time we reduce our hedge fund exposure. We believe hedge funds will add to our risk-adjusted performance over time but we are conscious that managed futures strategies are struggling as consistent trends may remain absent for a while.”