Fund selection - March 2016

Giovanni Becchere 

Senior Portfolio Manager - Multimanagement  & Solution, AA Advisors. Based in: Paris, France

“In the recent turmoil the fear of recession has been overdone, especially in the US where the economy is in transition to the second part of the business cycle after a prolonged recovery. So we decided to increase equity risk, adding the value-oriented Amundi Funds Equity US Relative Value. At the same time, we believe that risks in the global high-yield market have risen, largely based on the sizable proportion of energy and mining companies in the US high yield market, where default risk is increasing. We therefore switched from global to European high yield bonds, replacing Robeco High Yield Bonds with Schroder ISF EURO High Yield.”

Thomas Wells 

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

“February certainly turned out to be a game of two halves, with ‘Dimon Day’ marking the nadir. As is our custom, we used this correction to add some equity risk. Japanese equities have now seen a 25 per cent fall in their valuations, which is more significant than any other developed market, despite Japanese company earnings holding up well. We see this divergence as a buying opportunity. To fund this increase, we fully redeemed out of M&G European Loans, a fund that had continued to hold up well during this market turbulence. Our outlook remains unchanged: cautious optimism.”

Gary Potter and Rob Burdett

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

“Volatility in the oil price drove the direction of equities in the month both on the way down in the first half of the month and then up in the second with the net result being slight falls from most equity markets with the US the best performer. The Findlay Park US Smaller Companies fund was the best performer,  gaining more than 3 per cent in a slightly falling market. The fall in the euro against the yen compounded losses from the weak Japanese market to make the Schroder ISF Japanese Opportunities the worst performer falling more than 11 per cent. With a stabilisation in the oil price, markets have shifted their focus to central bank action to drive sentiment. While we do not foresee a significant deterioration in the macroeconomic backdrop in the near term, we expect markets to remain volatile given the high correlation with the oil price and hopes for central bank policy action which may be met with disappointment.”

Silvia Tenconi

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

“February was a tale of two halves. Risky assets fell until mid-February, then a stabilisation in the oil price prompted a strong rebound and a sector rotation, with cyclicals and small caps outperforming. High yield moved in synch with equity markets, both in the US and in Europe. Emerging Markets assets rebounded nicely as well. M&G Global Dividend, due to its cyclical exposure, and JPMorgan US STEEP, heavy in small caps, were the best contributors. We kept the portfolio unchanged: we prefer equities, high yield and alternatives to government bonds and cash.”

Fundquest Advisor Management Selection Team

FundQuest Advisor, BNP Paribas Group. Based in: Paris, France

“The MSCI AC World index fell by a modest 0.9 per cent in February. In the major developed markets, performance were quite uneven, with the US indices almost all stable, the European markets falling back and Tokyo taking a tumble (Topix down 9.4 per cent) as a result of the yen’s sharp rise. Fixed income is rebalanced in favour of short-term US high yield. On the alternative investments side, we reinforce the event-driven active bet. We reshuffle the European equity bucket in order to partly cut the Alken position.”

Peter Haynes

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

“Equity markets were boosted by some better than expected economic data releases in the US in the second half of the month. Growth, inflation and durable goods data all pointed to a strengthening US economy. Signs of stability in the oil price and continued recovery in metals prices also helped the energy and mining sectors. This helped the UK market, which is heavily exposed to energy and materials, to end the month in positive territory despite the looming Brexit referendum. Within the portfolio we retain our broadly neutral equity exposure and have made no changes to the funds during the month.”

Bernard Aybran

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

“The balanced portfolio kept the overall split unchanged between the different asset classes. However, one alternative investment has been added, by trimming another. The reasons for the move are twofold. First, the new holding brings less of an equity delta to the portfolio and more idiosyncratic sources of risk. Second, the current market conditions requires portfolio to be more diversified that in other market configurations. Thus, the number of holdings in portfolio is now standing at its maximum, ie 15, including a handful of highly diversifying holdings, with very low correlations to each other.”

Toby Vaughan 

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

“While we continue to expect equities to outperform on a medium-term basis, this is likely to be more region specific (preferring Europe and Japan) and accompanied by volatility. With this in mind, we are using recent strength to move to a more balanced strategy – reducing equities slightly further to 40 per cent. The proceeds are going to cash rather than fixed income or alternatives given that fixed income continues to suffer from expensive valuations (that could damage their diversification qualities) and at 21 per cent the allocation to absolute return strategies seems sufficient at this stage. A balanced and diversified approach will be key in the upcoming climate.”

Peter Branner

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

“As yields have continued to find new lows, absolute return fixed income strategies have been gaining in popularity. In October 2014, we took a position in BlackRock Global Absolute Return Bond fund with the expectation of a flexible investment process that can take advantage of opportunities in the fixed income space despite low yields. As fees are typically more connected to mandate flexibility rather than alpha delivery the return profile needs to be dominated by alpha in order to motivate the costs. Unfortunately we have witnessed high and consistent correlation to credits rather than unconstrained excess return. Hence, the position does not diversify our fixed income portfolio and we therefore redeem from Blackrock Global Absolute Return and reallocate the capital to our three remaining fixed income funds.”