Asset Allocation

A study by a group of researchers from Ghent University shows that the sentiment of the coverage in Fondsnieuws (Investment Officer Luxembourg’s sister Dutch sister publication, along with Investment Officer Belgium) positively correlates with market returns. From this the researchers conclude that the journalistic work of Fondsnieuws has a certain predictive value for future stock market performance.

“As corporate profits are rising much faster than expected, high valuations in the equity market are falling fast. Equities therefore remain attractive,” said Natasha Ebtehadj, global equities portfolio manager at Columbia Threadneedle, in a recent conversation with Fondsnieuws, Investment Officer Luxembourg’s sister publication.

“The relative performance of emerging markets versus developed markets is in cycles. At the moment we are in a downward cycle. Today almost everyone is negative, but certainly in China there are companies with huge cash flows that are very innovative and offer opportunities for an active manager,” said Gino Delaere (photo), emerging markets specialist and fund manager at Econopolis, from Singapore, where he has been living and working for years.

71 percent of ESG investment funds do not meet the global climate targets set out in the Paris Agreement. Moreover, many explicitly named “climate” funds still appear to invest in fossil fuels. Of the large providers, State Street, UBS and BlackRock in particular achieve poor scores, according to the researchers. 

Fund managers consider it less and less likely that the economy will continue to grow in the coming period. Normally, this uncertainty about future growth is a reason for investors to reduce their equity exposure. 

“This can cause downward pressure on equity markets,” Jeroen Blokland, of independent investment research firm True Insight, concluded in his Daily Insight on Wednesday, based on the latest Bank of America’s Global Fund Manager Survey.

In April this year, Auréus launched the Equities Blue Chips fund. The fund is in Morningstar’s highest rated percentile for sustainable funds. “That is amazing. The fund is not labelled as sustainable, and just this one is in the top percentile,” said Auréus’s Chief Commercial Officer Han Dieperink in an interview with Fondsnieuws, Investment Officer Luxembourg’s sister publication (for whom Dieperink writes regular commentary articles).

Emerging companies in the technology sector are often heavily overestimated, according to tech investor Richard Clode of Janus Henderson. “The trick is to remain cynical,” he said. Remarkably, he said he also sees opportunities in emerging market companies that have yet to go public. 

Institutional investors are increasingly turning to hedge fund strategies in response to low bond yields and high-priced equity markets. Some investors are building hedge fund allocations for the first time, while a second group is refining and improving existing hedge fund allocations, according to international independent investment consultancy bfinance in a recent report. 

The research firm notes that hedge fund portfolio construction has changed against a backdrop of increased uncertainty, given the pandemic and its macroeconomic consequences.

Jai Jacob, managing director and fund manager in Lazard Asset Management’s multi-asset investment team, creates his own asset classes because traditional subdivisions no longer suffice. Most recently, he created sustainable agriculture. He also takes a different view of emerging markets because this universe has become predominantly China, just at a time when Chinese markets are reeling. 

Equity markets in most emerging markets are lagging the US and Europe significantly this year. The reason for this is the stricter rules for listed companies in China and the continuing impact of the coronavirus. While the former is an ongoing source of uncertainty for investors, the latter creates buying opportunities, particularly in Southeast Asia.