Asset Allocation

Dear reader, with the power struggle between China and the U.S., geopolitics has made a comeback on the investor agenda. Reason for us as editors to create a series on geopolitics and investing. In seven episodes, we will discuss various geopolitical and market shifts that are changing the investor landscape, from Europe’s challenges to China’s rise, AI impacts and the global energy transition.

With a sophisticated dividend strategy, the Goldman Sachs Eurozone Equity Income Fund has been scoring above average for decades. “We spend our risk budget mainly on stock selection and do not deviate much from the benchmark in terms of sector and factor exposure,” said Nicolas Simar of Goldman Sachs Asset Management in an interview.

For years, it was taboo for funds to put money into arms manufacturers. Now, with the focus shifting to the protection weapons provide rather than the damage they cause, they are coming back into the picture as an investment. Asset managers fear being left behind in the market otherwise.

Equity investors cling excessively to certainties and undervalue innovations, leading to particularly strong return prospects for certain growth stocks, asserts Tim Garratt, an investment specialist at Baillie Gifford.

The European Central Bank (ECB) is charting a course of strategic patience, signalling a readiness for a gradual policy shift that could commence as early as June. Analysts uniformly anticipate that while the near term may see steady policy rates, a carefully orchestrated move towards easing is on the cards.

As the ECB prepares for its forthcoming rate decision on Thursday, leading financial analysts have shared their insights, painting a picture of what asset owners can expect in the coming months.

Sofia Harrschar, head of alternative investments & structuring at Universal Investment, delves into the shift towards alternative investments among institutional investors.

Sentiment around defence stocks appears to be on the upswing. Numerous investors previously avoided such investments, yet deglobalisation and geopolitical unrest have made the case for investing in defence more tenable.

Better ESG scores of listed companies do not necessarily lead to higher equity returns. Contrary to the claims of numerous asset managers, this link cannot be scientifically proven, according to researchers from Erasmus University and Boston University.

Comparatively minimal macroeconomic news of substance emerges from China; however, the information that does reach me through Bloomberg and other outlets offers little cause for optimism. To illustrate the initial point: a decade ago, China’s National Bureau of Statistics released over 80,000 economic indicators; presently, this figure has dwindled to fewer than 10,000.

Chinese stocks are the opposite of US Big Tech stocks in almost every way. They are cheap, but nevertheless unloved.

Those looking to invest in emerging markets can even choose a variant of emerging markets ex-China these days. Consequently, global equity portfolios hardly contain any Chinese stocks anymore. This means that just a little bit of good news can cause a sharp price recovery. The time has come to include more Chinese equities in portfolios.