Iveagh’s launch of a retail fund could prompt questions about

the role of family offices, reports Elisa Trovato

Ongoing success in the German derivatives market has led issuers to call for a move into foreign markets, reports Meike Schreiber

The industry’s hopes that investors will put money into funds before

a flat rate tax comes into effect in 2009 may not be realised

German banks need to focus on advising clients rather than asset management, and foreign groups are eyeing the opportunities that could emerge as a result

Elisa Trovato talks to Gian Luigi Costanzo, CEO of Generali Investments, about his preference for slow and steady growth over time rather than eye-catching expansion

Overseas expansion, more focused client relationships and a closer look at new products are just some of the steps being taken by asset managers looking to drum up new business in the wake of the economic crisis, writes Yuri Bender

A year on from the credit crunch it is time to evaluate where portfolios are standing. At first glance it certainly appears to be a gloomy picture. We believe tighter credit conditions, increased defaults on loans and mortgages by consumers and bank write-downs will continue to create a challenging environment in the year ahead.

Recent market turbulence has seen clients increasing their allocation to alternative investments, particularly in sophisticated markets. But some investors still perceive them as a risky allocation, writes Elisa Trovato

Multi-asset structured products are a one-stop shop for investors to capture their investment views and diversification needs, making them an appealing investment proposition. These products can be structured to give either direct exposure to the underlying assets or indirect exposure through actively managed underlyings such as funds, write Julie Wan and Federico De Palma

Despite the collapse of mega deals and slowing activity, private equity fund raising is in a healthy state and the asset class can provide premium returns over the longer term, writes Marwan Naja

Low rates of growth within domestic markets have led many European

companies to expand on a global scale, writes Ceri Jones, while the differing natures of the European economies themselves offer diversification benefit

Thematic investing builds upon intuitive ways of thinking about the world and its economies, but it takes allocators out of the traditional CAPM and efficient-portfolio models. What are the advantages of investing in this way, and how do practitioners manage risk? Martin Steward reports

Investors are looking for products that are clear and easy to understand, writes Nat Mankelow, but are happy for the underlying assets to be based on widening investment themes

“Markets have been weak in July. For the first time in a few months, bond markets have behaved as a hedge against equity markets. We are still investing in defensive equity funds, starting a position in the ING European High Dividend. We also increased our convertible bond exposure, because of the very conservative pricing of many convertible issues. We keep our exposure to long duration bonds (AXA 7-10) on the view that inflation will peak in the next few months.”

“During July, global markets were mainly influenced by decreasing oil prices and a stronger US dollar. While the oil price lost 15 per cent of its value within two weeks, the dollar appreciated more than 2 per cent against the euro. The US government’s announcement of a rescue plan for mortgage firms Fannie Mae and Freddie Mac somewhat revived international markets. Congress supports the plan which allows the government to buy shares of the two companies and raises the limit on government borrowing. Our global asset allocation remained unchanged; only two funds were replaced.”

“The fall out from the sub prime crisis continues to dominate equity and bond markets. While the majority of asset classes have witnessed the volatility associated with the credit squeeze, few investors have struggled more in this environment than corp-orate credit investors. Given current valuations and the longer term outlook for investment grade debt, we have increased our allocation. We are aware that the markets will remain volatile in the shorter term and flexibility along with excellent underlying credit selection will be vital. In this environment the highly regarded credit focused team at BlueBay should perform well and deliver strong absolute and relative returns.”

“The portfolio lost 1.8 per cent in July. Bond markets advanced and equities declined, especially emerging markets. The best fund in the portfolio was Pictet Asia Local Currency Debt, which rose 2.3 per cent. A reflection of the strong initiative seen from most Asian authorities, who have hiked short term interest rates and lowered subsidies to primarily fuel and food. The will to make these unpopular decisions bodes well for the asset class going forward. In anticipation that equities are nearing the end of their correction we have put 5 per cent back into US equities – Fidelity American Growth. We have removed money from ING Senior bank loans, which have recovered well over the past five months.”

We reduced our exposure to US equity markets by removing Wintergreen Fund and Nordea North America Value Fund. We took a bigger exposure to global equity markets adding a new fund to the portfolio, DWS Global Value Fund, and increasing the weight of M&G; Global Basics Fund. Low turnover in the portfolio is a goal of our activity, especially considering the present conditions of financial markets, marked by persisting high volatility. In spite of unsatisfying results in the short term, we believe that the portfolio is built to return a good performance over the medium-long term.”

“Over the last two months, our portfolio has suffered from the strong correction on global equity markets. There was practically nowhere for investors to hide as both developed and emerging

countries dropped dramatically. On the other hand, government bonds and total return vehicles brought positive returns, where implied volatility didn’t get in the way by playing a defensive role. We introduced the fund ‘Lyxor Quant Progressive’ which aims to generate returns with a low correlation to bonds or equities. It favours hidden assets such as volatility and correlation. We’ve increased our holdings on US high yield bonds, benefiting from their recent correction.”

“June and July were difficult months and they witnessed a big reversal in the markets. The rapid unwinding of the short financials/long energy/long commodity trade has hit many managers. Those who had previously done well suddenly found themselves losing money also. Those who were relatively nimble managed to cushion the loss to some extend. Some hedge funds will undoubtedly have been hit. We expect some further pain in the energy sector and commodity area but will look to allocate money to some specialist funds in this area following any further falls.”

“Our balanced portfolio is by now more conservative than is has ever been before: the equity weighting stands at 30 per cent whereas the money market is worth 40 per cent. At some point it will be time to add risk to the portfolio: several markets or sectors have fallen by 50 per cent or more in a matter of less than a year, so that valuations are now at such levels that buying opportunities arise. For instance, everything related to oil has been severely hit, while European stocks remain so unloved by the consensus, that a rebound would take everyone by surprise.”

“This month, central banks interventions as well as a fall in oil price brought about a bit of short-term optimism. In this

context, we increased our equity exposure. We keep a strong weighting into hedge funds in spite of the recent correction. Nonetheless, as the global panorama is still unclear, we remain cautious about equities. In terms of geographic exposure, we continue to favour US and Japanese stocks, even if we have reduced our Europe underweight exposure. We think that emerging countries with a strong domestic demand still have potential. However, we have decreased our commodities exposure.”

“Coinciding fears of higher inflation and slowing economic growth

continue to sap confidence out of the markets. Just two funds within the portfolio made any sort of progression. Firstly, Fidelity Euro Bond which is an investment grade orientated fund plus, secondly, the value-defensively styled Findlay Park American US Smaller Cos, which over the years has been an exceptional performer.”

“One of the hottest themes in product launches is currently the MENA region, i.e. the Middle East and North Africa. From a fund selector’s point of view, unfortunately the peergroup is rather heterogenous. The most important distinction between funds is the country allocation. Some funds include Turkey and Israel as key markets of the region while others focus on the Gulf countries and/or Northern Africa. Turkey is a typical emerging market story. The Gulf countries use their windfall crude revenues for a prudent transition of their economies. One should not mix the investment cases in one product as they are so different in nature.”

“July saw many markets hit new lows for the year, before rallying a little in the second half of the month as the oil price fell back from new highs. In euro terms the US and the local markets fared 'least worst', but bond positions in some cases rose and in our portfolio the Invesco and both Thames River bond funds all made positive returns. Looking out we call time on JOHCM European Select Values and bring in the more flexible Neptune European fund, at the same time rejigging our weightings a little. Overall we remain cautious strategically but at the time of writing a little more optimistic tactically for the very short term.”

Each month in PWM, 12 top European asset allocators reveal how they would spend €100,000 in a fund supermarket for a fairly conservative client with a balanced strategy