Investing

In a remarkable turn of events, actively managed equity funds suddenly saw substantial inflows in May, after months of steady outflows. At the same time, investors left index trackers in droves.

Agreement on the European coronavirus recovery fund could be a “gamechanger” for the European Union, according to Vincent Juvyns (photo). It’s his main reason to be a bit more positive about European stocks again.

The Global Market Strategist at JP Morgan Asset Management is “very impressed” with the European approach to tackle the impact of the virus. Although a final agreement has yet to be reached, the fact that Germany is taking the lead in this strengthens his confidence this will happen soon.

State Street’s Global Investor Confidence Index increased to 94.3 points in June, more than 20 points higher than the low it reached at the height of the coronavirus crisis in April. European investors are most upbeat.

The confidence of European investors rose more than 11 points to 119.7, meaning the majority of investors on the continent are increasing their allocations to risky assets. Asian investor confidence moved backed to neutral, rising 18.6 points from its May reading.

Skagen Global remains an outlier among global equity funds. The fund shuns most big American technology stocks. ‘The valuations are still unjustifiable for us,’ says manager Knut Gezelius who, despite this underweight to big tech, still managed to beat the market year-to-date.

Due to a sustained period of underperformance, investors are increasingly questioning the validity of factor investing. Georg Elsaesser, Portfolio Manager Quantitative Investment at Invesco, has a simple explanation for the underperformance, and is not worried, yet.

‘The value factor and small-caps in particular have done badly, but that can be explained by the market environment. All factors are still doing what they are supposed to do,’ says Elsaesser.

Despite the profound economic shock that continues to play out, investors in private assets appear to be quietly confident that this is a major but temporary setback. Two players in Luxembourg’s financial sector share this cautious optimism as they see investors taking a long-term view.

The performance gap between East Asia and other emerging markets has never been greater than in the first five months of 2020. At first sight, the cause looks obvious: coronavirus. But in the background there is a different dynamic at play.

Ironically, the ranking of best-performing stock markets in 2020 is led by China, the country where the pandemic originated. Korea and Taiwan are also well on their way, and in any case doing much better than most other emerging markets (see graph below).

The Echiquier Agenor SRI Mid Cap Europe fund managed to limit its losses year-to-date to only -0.47%, even as its net asset value had risen by 34% in 2019. The secret? A strong focus on ‘structural winners’ and strict valuation discipline, resulting in an exceptionally high cash position at the start of the coronavirus crisis.

Europe and the United States are facing an almost unprecedented economic crisis: debts are rising faster than ever while growth has plummeted. But investors have decided not to focus on the dark side of the moon, but to look on the bright side of life instead.

Companies that opted to retain their staff and take measures to support their suppliers during the coronavirus market crash have been rewarded for this by institutional investors. According to research by State Street Associates.