Asset Allocation

Quintet Private Bank sees “significant long-term opportunities” in a world that has experienced multiple ‘black-swan’ type events – Covid-19, the invasion of Ukraine and a miniature version in China’s decision to lock down Shanghai in late March. Presenting the firm’s outlook, Ilario Attasi, group head of investment advisors, and Nicolas Sopel, senior macro strategist, said investors can still find opportunities in tech stocks, among others.

It’s not difficult to compare today’s era to the 1970s. An energy crisis, a hot war, a cold war, persistent inflation, soaring interest rates, rising house prices. Even Abba, with its flared trousers, is performing again, albeit as a hologram. For investors, a rerun of the 1970s would require a profound rethink. 

British asset manager Fundsmith follows a simple strategy: invest in strong companies, don’t pay too much and then keep them in the portfolio, preferably forever.

Over the past five years, US equities have shown superior performance. Measured over the five years ending May 2022, the S&P 500 index achieved an annualised total return of 13.9% in euros, compared with 10.8% for the MSCI World index. The return of the MSCI Europe index compares favourably with 5.1%. Only in 2017 did US equities perform less well, but in the years thereafter it was America First.

Chinese bonds have defied the general negative trend in bond and credit markets this year until recently, but ended May with heavy losses. 

As yields increase, several fund houses have recently bought European government bonds, following the ‘huge sell-off’ in this market. In the meantime, commodities should ease the pain of high inflation.

The neutral mixed fund portfolio consisting of 50 percent equities and 50 percent bonds remains popular despite year-to-date losses.

The introduction of the EU Sustainable Finance Disclosure Regulation should enable investors to better assess investment funds on their sustainability merits. The framework divides the fund landscape into three groups, with so-called Article 9 funds designated as the most sustainable, or dark green funds. 

Despite a wider uptake of alternative energy, fossil fuels like natural gas, oil and coal are here to stay for the next decades and the MSCI Global Energy Composite index will outperform both renewable energy stocks and the broad equity market over the next year, JP Morgan Asset Management said in its 2022 Annual Energy Paper.

Investing in trees might at first not seem the quickest route to wealth. Yet timber investments increasingly leverage their clear connection to sustainability and their long-term real asset investment characteristics. Timber investments, although not suited for everyone, can serve as a hedge against inflation, and as a commodity that can benefit from strong economic growth.