… asset and wealth managers around the globe are publishing their investment outlooks for the year ahead. But how serious should investors take these outlooks when thinking about the asset allocation of their own portfolios? Especially as the results from the different outlooks may differ widely. That said, it is good that the outlooks differ, since this means that different economists are not expecting the same market movements across the board. In addition, it might be good to read contrarian views which may challenge expectations and lead to new assumptions for the year ahead. When it comes to this, the

Since we have seen a change in investment behavior of European investors between January 1, 2019, and August 31, 2024, with regard to their product preferences in the segment of long-term investment products (Please see the article: “Is there a Change in Investor Behavior in Europe” for more details), it is worthwhile to analyze how much of the assets under management are actively managed and how much of the assets are invested in passive instruments. Since not all long-term asset types (alternatives, bonds, equities, mixed-assets, other, and real estate) are investable with passive products or have significant assets under management,

When Ronald Reagan said that the nine most dangerous words in the English language were “I’m from the government and I’m here to help,” he provoked a storm of protest from all sides of the political debate. Governments clearly can help drive competitiveness through improved skills policies, by investing in infrastructure and housing, as well as supporting innovation through R&D and incentivizing capital investment towards startups. Indeed Reagan embarked upon a radical new industrial strategy – the Small Business Innovation Research program – which between 1995 and 2018 generated an additional $184 billion in value added. But governments and investors

April 2024 was another month with healthy inflows for the European ETF industry. These inflows occurred in a further unstable market environment since the geopolitical tensions in Middle East increased over the course of the month. Especially the developments around the Red Sea may impact the economies in western countries, since a number of shipping companies these days avoid the passage of the Suez channel. It is, therefore, to be expected that the prolonged delivery times will cause some tensions for the still vulnerable delivery chains. Market sentiment was further driven by hopes that central banks—especially the U.S. Federal Reserve—have

For more than a decade, US stocks have essentially been the only game in town for equity investors. Emerging markets (EM) such as China, India, and Mexico have been left behind, as the dominance of the ‘FAANG’ stocks (an acronym for Facebook, Apple, Amazon, Netflix, and Google) powered US markets higher. More recently a new group dubbed the ‘Magnificent Seven’, consisting of most of the FAANG stocks but with the addition of Microsoft and high-fliers Nvidia and Tesla, have tilted the balance further in the favour of US equities. Aided by the launch of GPT-4 on 14 March 2023, the

Investors often fail to distinguish between uncertainty and risk. This is partly because there is an army of strategists advising investors how to manage risk through market narratives. These narratives attempt to explain away the complexity of the world we live in, giving the impression that uncertainty can be managed. Although listening to stories is fun and can make us feel confident about the future, investors need to embrace uncertainty to generate robust returns rather than listening to those who attempt to explain it away. A perfect example of this has been the liability driven investment (LDI) approach taken by

The European ETF industry shows a high concentration of assets under management at the promoter level. This may lead to the assumption that assets under management must show a high concentration on the level of the fund domiciles too, since common sense would expect that the promoters of ETFs tend to launch all their ETFs in a single domicile. This assumption is not 100% true, since especially those ETF promoters with large product ranges and/or a local bank as a distribution channel are tailoring their product offerings to the needs of all stakeholders. This means the respective ETF promoters launch

Within a market environment in which all major equity and bond indices face negative returns year to date, it is somewhat surprising that European investors pulled money out of bond funds while (passive) equity funds are still enjoying estimated net inflows. Given the current economic and geopolitical situation, it is also not surprising that European investors favor mixed-assets, or so-called multi-asset funds, as they expect that these funds might be able to weather the rough market conditions in the same way they did other rough market periods in the past. But those investors might face a nasty surprise, as the

It was not surprising that April 2022 was in general a negative month for the European fund industry given the geopolitical situation in Europe, the still ongoing COVID-19 pandemic, disrupted delivery chains, and the sluggish market environment. That said, the promoters of mutual funds (-€20.5 bn) faced outflows, while the promoters of ETFs (+€14.2 bn) enjoyed inflows. Within this market environment and given the economic uncertainties, one would expect that European investors sold long-term funds and bought money market products. Therefore, it is somewhat surprising that European investors are still reluctant to buy money market products on a larger scale,

U.K. large-cap equities continue to be resilient in the face of multiple headwinds, as the FTSE 100 is the third strongest performer year-to-date.  The index is up 4.7%, only behind to the Brazil Bovespa Index (+9.1%) and OMX Oslo All-Share Index (+10.5%). We note possible reasons for relative outperformance in a prior note which include index composition (higher tilt towards value), attractive valuations and higher dividend yields (A Case for U.K. Equities: Valuation and Yields Look Attractive, March 31, 2022).  However, we note that small-cap companies have underperformed as the FTSE 250 has declined 9.2% year-to-date in the face of

U.K. equities have generally underperformed its global peers consistently over the last decade.  The FTSE All Share has experienced a compound annualized growth rate (CAGR) of 4.7% and 7.3% over the last 5 and 10 years respectively.  In comparison, the Russell 1000 CAGR over this same period is 16.5% and 14.9%, while the Datastream World Market CAGR is 11.1% and 9.9% respectively. The start of 2022 has been one of the most volatile on record which we highlight in a prior note (Data Insight: A Turbulent Start to the Year for Global Equities, January 27, 2022).  To this point, the

European investors in general were further in a risk-on mode over the course of the year 2021 as equity funds were the best-selling asset type for the year. In fact, the European fund industry enjoyed record inflows (€724.1 bn) over the course of the year 2021 despite the unclear economic situation caused by the ongoing COVID-19 pandemic, disruptions in the delivery chains of some industry sectors, and steadily rising inflation. That said, it is remarkable that the year 2021 was the second year in a row during a global crisis in which the European fund industry enjoyed record inflows. With