Asset Allocation

Chahine Capital’s macroeconomic analysis shows that European equities and value are now the most attractive in this cycle. The European risk premium is particularly high. Italian equities have strong rationing potential.

This emerged from an interview with Julien Bernier (chief investment officer) (photo) of Chahine Capital. Among other things, the Luxembourg-based manager will use macroeconomic analysis to define four distinctive pillars, namely economic momentum, monetary policy, valuation and a behavioural component. 

The search for yield is causing a rotation among institutional investors from classical investments to better yielding alternatives, such as hedge funds. Insurers such as AXA expect hundreds of billions in ultra low or negative yielding government bonds to be exchanged for other investments in the coming years.

Rolando Grandi, a fund manager with La Financière de l’Echiquier has highlighted the huge opportunities linked to the development of the space sector, with many companies expected to go public in the coming years. 

Research by French think-tank Edhec shows that ETFs that are so-called “Paris aligned” take the climate score into account for no more than 12% of the factors underlying stock selection. Climate scores, at best, play second fiddle.

The 10-year and 30-year US yields are pushing towards the top of their trend channels. These interest rates are all-important for the further evolution of long-duration assets. 2 per cent on the 10-year segment seems to be a breaking point. A barbell strategy between value and growth may offer a solution.

With listed infrastructure companies passing inflation directly on to their customers, investors can use them as a hedge against rising inflation, according Thomas van der Meij of Van Lanschot Kempen, a Dutch wealth management firm active in the Benelux region.

“Communication towers, toll roads and, to a lesser extent, airports perform well in a high-inflation environment. Meanwhile, US railways and energy transmission companies are benefiting from high commodity prices,” he explained. 

Keith Ney of Carmignac has said stock markets are still in a favourable climate. China remains an interesting country in which to invest, both for equities and bonds.

Ney joined the Strategic Investment Committee of Carmignac in April 2021. He has developed particular expertise in bonds and their place in a portfolio. His long career with the French manager has given him expertise in both equities and bonds. In addition to his role on the committee, he is direct co-manager of the Carmignac Patrimoine Europe fund.

“It is no secret that we at BlackRock have embraced sustainability rather late. The turnaround came with top executive Larry Fink’s letters to shareholders about creating long-term value, then purpose, and then sustainability in 2020.

Every day, Natixis IM’s head of multi asset James Beaumont and his team wonder how much higher the equity markets can go. Yet, according to him, the issue that is keeping multi asset investors awake at the moment is something else. What should they do with government bonds? 

Industrial, technology and healthcare stocks now offer a good mix between yield and defensive characteristics. China is undergoing an intensive reform phase, moving from “the end of poverty” to “common prosperity”. This offers opportunities for investors, as the country is a long-term challenge. However, investors have quickly priced in the uncertainty surrounding the regulations.