Investing

Luxembourg is hoping its long, friendly relationship with China can help keep the superpower on a path towards more investment-friendliness instead of sable-rattling with the US. Levels of investment in China by Luxembourg-domiciled investment funds dipped during that country’s difficult Covid times. Some institutional investors are staying away due to darkening US-China relations. Hopes for a resurgence depend on peace.

The negative correlation between bonds and stocks is no longer a certainty due to structurally higher inflation expected in the coming decade.

May saw a 6.1 percent increase in consumer prices in the EU compared to the previous year, the lowest level since February 2022 and slightly lower than economists’ predicted 6.3 percent. In the United States, inflation has now dropped below 5 percent, the lowest level in two years.

Market consolidation, pressure on cost and the weight of regulation have reduced the total number of Management Companies in Luxembourg by four last year. The latest edition of PwC’s annual Manco Observatory nevertheless sees this industry as “very dynamic”, with 11 new Manco’s having been set up in the last year.

The market is expecting a 75 basis point rate cut by the Federal Reserve after a six-month pause. According to Invesco, the likelihood of that happening is much lower than the market thinks. This is good news for emerging markets, said Wim Vandenhoeck, senior portfolio manager for EMD and global bonds.

One of the elements that Bitcoin investors cite is the cryptocurrency’s performance when the stock market is doing poorly. These coins are then often described as a “flight-to-safety” investment: an asset that rises in value when the rest of the portfolio goes down. Is this really the case?

Fund management companies in Luxembourg registered some 22 new reserved alternative investment funds (Raifs) in April 2023, according to publicly-released data updated on 15 May. This development brings the total for this year so far to 128. Considering only the first four months of the year, the total number was down 20 per cent from last year during the same period.

Institutional investment portfolios in Europe could do with more venture capital, especially when it comes to making green impact investments, the Netherlands’ technology investment envoy Constantijn van Oranje-Nassau said in an IO Talks podcast interview. Van Oranje, who leads Amsterdam-based Techleap, a Dutch government sponsored tech investment initiative, spoke about the global business climate for technology investments, the effects of rising interest rates on tech investments, dilemmas around artificial intelligence, and the new Nato Investment Fund, which is being structured via Luxembourg.

The latest edition of the Bank of America Global Fund Manager Survey shows that fund managers are still overweight equities while their expectations of future economic growth have come down considerably.

Indeed, the chart below shows that fund managers have never been so pessimistic about growth. Not during Covid and not during the Great Financial Crisis. The ‘mismatch’ between expectations and positioning is extreme.

It’s the middle of May and the full-year results are in. For publicly listed companies it would be yesterday’s news. Tax filings have been made and many firms even reported their first quarter. But in private equity, with its long-term perspectives, the ‘old’ data still can be worthy of a cover story, certainly when it comes to a year like 2022, marked by war, inflation and surging interest rates. The Q4 2022 Burgiss report shows how the market did.