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IPE Quest Expectations Indicator: July/August 2019

Asset Selection
Markets are still driven by political risk and growth prospects. It looks like the two risks are working in the same direction this month. Equity sentiment reduced everywhere, but notably in Japan, where Trump’s trade war with China causes angst. Bond sentiment moved up, but remained within negative territory. Figures for neutral on equity and bonds converged, reflecting increased political uncertainty. Neither equities nor bonds are seen as safe, so what can an investor do?

Country Allocation
EU equity sentiment is at the bottom of a hole it has been in since the start of the year. While this is driven by growth prospects and the expectation of a short low-growth period, Trump’s threats against French wine will not have helped. If so, there is cause for optimism: wine is a minor trade product, so a worse growth development may be cushioned by a reduction in political risk.

US neutral sentiment for bonds and equity have converged, but at a high level, indicating uncertainty. Yet, markets hardly reacted when Trump made an about-face on climate change. This is a reflection of low credibility, coupled with a high capacity for causing economic disruption. Bond sentiment is at its highest in 12 months. At this pace, it will be positive next month.

UK equity sentiment is now virtually at zero, while bond sentiment remains stable and negative. Investment is exiting. Neutral sentiment is virtually equal for bonds and equity. Negative growth prospects coupled with the fear that a ‘no-deal Brexit’ is again likely, although widely seen as unattractive or worse.

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Japan’s loss of faith in equity is continuing, to the point where the distance between equity sentiment and bond sentiment is smaller than anywhere else and the lowest in 12 months. It is brought in perspective only by the high vote for neutral: even those who have a view are equally divided between a positive and a negative view.

Peter Kraneveld, International Pensions Adviser, PRIME bv

ipe quest expectations indicator july august 2019 06 27 at 16.38.36

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IPE QUEST

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IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2555

    Asset class: Real Estate.
    Asset region: European.
    Size: EUR 50 - 100 million.
    Closing date: 2019-07-22.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

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