Jurgen Vluijmans

In recent days we have seen a massive correction in Chinese stock markets, both in Hong Kong and the mainland. This was due to particularly strict regulatory measures taken by the Chinese government around education stocks.

A monetary policy mistake is now a very big risk about which markets are not taking sufficient account. Tightening at the wrong time could trigger a recession. The first half of the year was very positive, but you also have to dare to take profits. Inflation will be more persistent than generally assumed. Caution is therefore advised.

In certain sectors, the correlations between equities and bonds are turning positive (again). That is a serious challenge for asset allocators.There is usually a negative correlation between the performance of stocks and bonds. But since the pandemic, a number of sectors, such as tech, consumer and communications, have seen a positive correlation, a recent study by Fidelity International found.

Long-term interest rates will continue to rise, as will inflation. And the correlations between German government bonds and equities will become positive again. That’s a tough sell for the management of multi-asset portfolios. Fortunately, there are alternatives such as swaps and floating rate notes. And value stocks are preferred in an environment of rising interest rates and inflation.

La Financière de L’Echiquier (LFDE) wants to gain a foothold in the Netherlands, following in the footsteps of Belgium and Luxembourg. The boutique manager from France focuses on medium-sized pension funds and wholesale in the Netherlands. The French argue that their niche thematic strategies can offer added value as a ‘satellite’ in the asset allocation of such parties.

Taking an ‘old-school’ approach to asset management, but in the positive sense of the term, is what CPB Quilvest wants to achieve. The niche asset manager based in Luxembourg and with a branch office in Belgium wants to continue to build on its strengths via a horizontal and open structure. Organic growth is paramount and open architecture is one of the pillars of the business model.

At BNP Paribas Fortis, the bank has seen its private equity business double and even triple in recent years. Corporate bonds have gradually replaced nominal government bonds, as have high yields. And they are investing more and more actively, which is linked to the rise of thematic investing.
 

The average credit quality and rating of convertible bonds has improved significantly in recent years. Thanks to their convexity, these hybrid instruments, whose universe is highly diversified, are more attractive than ever in any context. They are seen as halfway between investing in bonds and equities.

This is what Emmanuel Martin (pictured), manager of the Echiquier Convexity SRI Europe fund at La Financière de l’Echiquier (LFDE), said in an interview with Investment Officer.

Renowned investor Michael Burry has taken a short position on Tesla and is aiming for an inflationary environment in the coming years.

According to traditional valuation metrics, US equities are expensive. In this analysis, we provide two arguments for continued outperformance of US equities, and two in favour of better performance of non-US equities.