Each month in PWM, nine top European asset allocators reveal how they would spend €100,000 in a fund supermarket for a fairly conservative client with a balanced strategy.
Benjamin Hamidi
Senior portfolio manager, ABN AMRO Investment Solutions.
Based in: Paris, France
“The increase in tariffs announced by the US president significantly raises the global average rate of tariffs and ultimately all the costs of US imports. The market is adjusting rapidly, reflecting the uncertainties weighing on the economy. If these tariffs are not reviewed quickly, this should lead to a fall in global activity and a rise in inflation. This stagflationary mix also makes it uncertain how the US central bank will react. Against this volatile backdrop, a diversified asset allocation is maintained at this stage, but we remain vigilant about economic activity, political risk and any developments in the trade war.”
Luca Dal Mas
Senior fund analyst, Aviva Investors.
Based in: London, UK
“The US imposed sweeping tariffs on all countries based on the size of the US trade deficit, causing significant disruption to businesses and consumers. China retaliated with tariff hikes, escalating trade tensions. This news has led to panic selling in stockmarkets worldwide, with major indices seeing substantial declines. Markets are rapidly pricing in a higher chance of recession, with many participants now considering it the base case On the economic front, despite solid indicators like jobs, durable goods and auto sales, sentiment is deteriorating quickly and inflation for March is expected to be around 2.5 per cent but could rise to 4 per cent with tariffs. In portfolios we have taken profits in US equities during March while increasing our exposure to global government bonds and maintaining our exposure to gold.”
Jorge Velasco
Director of Investment Strategy, CaixaBank Private Banking.
Based in: Madrid, Spain
“We take an additional cautionary step regarding portfolio positioning in a scenario with higher tariffs than expected, which will result in lower economic growth and higher inflation in North America. The US is seeking to reduce its financial vulnerability to the rest of the world. It needs to reduce its trade and primary deficits and balance its budget, and to do so, it is establishing tariffs as a tax to moderate domestic consumption, weaken its currency, and reduce public spending by improving its efficiency. In this environment, the valuation premium that US financial assets and the dollar had may be affected. We are doing this by selling part of the position in the global equity fund, thereby also reducing exposure to the dollar. Additionally, we are eliminating satellite bets on mid-sized North American companies and global defence due to their higher exposure to the US cycle. We partially compensate for the exit by increasing exposure to European equities, although most of the volume is redirected towards fixed income.”
Adam Norris
Portfolio Manager, Colombia Threadneedle Investments.
Based in: London, UK
“US mega cap technology stocks, now a significant proportion of world indices, came under pressure in March as the market started to consider the effects of wider AI-related breakthroughs, from non-US companies. While cheaper prices and wider adoption may be a good outcome for productivity and society, perhaps the growth rates of the incumbents may not be as high as expected. In addition, European governments began to grapple with what a more isolationist US foreign policy might mean and readied a much larger defence budget. As a result, European indices were propelled higher. The above effects have led us to adjust our own asset allocation views, trimming back an overweight in US equities and favouring Europe. In addition, we reduced overall equity in favour of cash. The best performer through March was the uncorrelated absolute return fund, Iguana Long/Short Equity Fund, and the worst Alger US Focus Equity.”
Silvia Tenconi
Multimanager Investments & Unit Linked, Eurizon Capital SGR.
Based in: Milan, Italy
“In March, the performance of the portfolio was negative, with UBS USA Growth detracting the most. It was a negative month for all asset classes: equities fell, credit fell, and government bonds also fell in Europe. The euro appreciated pretty much against all currencies and US exceptionalism is being put to the test. Uncertainty about economic growth, inflation and geopolitics is rising, depressing risky assets. Yet we prefer to see the dust settle before making any hasty decisions. We keep our balanced exposure to equities, high yield, the US dollar and Italian government bonds.”
Richard Troue
Fund Manager, Hargreaves Lansdown Fund Managers.
Based in: Bristol, UK
“The end game for tariffs and trade wars has too many known unknowns, never mind the unknown unknowns, to pick over. Obsessing over minute-by-minute price moves, news updates, and opinions isn’t conducive to clear thinking and good decisions. Our portfolio is set up for the long-term. Exposure to equities and credit is relatively high, so risk-off events are neither welcome nor helpful. But they’re inevitable. We accept this and don’t panic. We have a sensible long-term allocation and high-quality managers who can hold up well and capture any recovery. So, I’m going to follow the advice of someone who taught me a lot and I respect greatly. They’ve just written some views on the latest turmoil and lessons from six decades of investing: ‘Sit tight and do nothing.’”
Paul Hookway
Senior Fund Analyst, Kleinwort Hambros.
Based in: London, UK
“A month most would like to forget but can’t. Trump’s tariff roll-out continued to drag on market sentiment, but after ‘Liberation Day’ in early April markets took flight. In addition the US dollar weakened against sterling, further dragging down returns. At the start of April we reduced US equity exposure by 5 per cent, increasing cash in the short term, until we decided how best to deploy it. China has retaliated with extra levies on all US goods and curbs on some rare earths. It will be a tricky few weeks as investors consider how they invest capital overseas, given the deepening trade war.”
Antti Saari
Chief Investment Strategist, Nordea investments.
Based in: Copenhagen, Denmark
“A correction in US technology stocks pulled down global equities in March, and lately, tariff announcements have escalated the drawdown. As a result, valuations and sentiment have become more supportive while economic data has so far been decent. However, uncertainty around the trade war and US fiscal policy has clouded the outlook. Investors should brace for further short-term volatility as negotiations between the US and its partners begin, but the policy mix globally should support growth, and the worst fears may prove short-lived. Nonetheless, we keep our neutral allocation between equities and bonds due to the increased uncertainty. Investment grade corporate bonds continue to offer an attractive pickup over government bonds with rather small risk.”
Didier Chan-Voc-Chun
Head of Multi-Management and Fund Research at Union Bancaire Privée (UBP).
Based in: Geneva, Switzerland
The tariffs announcement by President Trump exceeded most expectations, raising the average tariff on US imports from 2.5 per cent to 24 per cent, a level not seen since the 1930s–40s. These increases will dampen trade and activity in all countries, and there is a great deal of uncertainty about the outcome of any tariff negotiations. This environment also increases the risk of recession in all countries, including the US. In response, we have reduced exposure to US equities, favouring fixed income investments in order to manage risk.”
