Investment managers at Mediolanum International Funds discussed their latest asset allocation and trends shaping the industry at the fifth annual Mediolanum International Media Event (MedMe) in Dublin last week, attended by this news service.
In an interview with this news service last week in
Dublin, Christophe Jaubert, chief investment officer at
Mediolanum
International Funds discussed the firm”s asset allocations.
He outlined the benefits of being diversified across
equities and fixed income and across regions. The firm
has neutral exposure to equities, and is neutral across
regions namely the US, Europe, emerging markets and Japan. It is
slightly overweight in duration and like high yield.
Faced with the Middle East conflict this year, he said they
became a bit defensive on equities when they realised it wasn’t
going to be short term, but after a while, they came back to
neutral as the market was not reacting so defensively. “Overall,
our performance was not really affected by the conflict,” he
continued.
In terms of allocation on the equity side, he is still convinced
that growth will be there in the US with the strength of the AI
cycle which will filter down into the rest of the economy.
“Everything tells me that the US economy is doing well. When you
look at the fixed income market, the quality inside the high
yield market has been increasing. We don’t see any big recession
coming.”
“The big subject is the debt in most of the country with few
exceptions,” he added. “The good news in the US is that they have
the capacity to raise tax if they want as they start from a lower
base and can increase capital gains tax or corporation tax.
That’s the advantage of the US compared to Europe, for example,”
he said. “In Spain, France and Italy, where there are also high
debt levels, tax rates are already high at around 45-50 per cent.
They have less margin for manoeuvre. If interest rates stay too
high too long, it could impact consumer, corporate borrowing and
there could be a slow down.”
On equities, Jaubert is neutral on the US as valuations are quite
high and neutral on Europe due to the problems there,
although valuations remain quite
cheap. He is neutral on emerging markets and Japan
where valuations are quite reasonable. “We like Japan as it’s an
area where we can find quite interesting opportunities,” he
continued.
Along with a number of investment
managers, such as Carmignac, Comgest, and Indosuez Wealth
Management, Jaubert likes tech-driven emerging markets which are
concentrated in a few names although that can also pose a
diversity risk. He invests in Taiwan, Korea, namely in the Taiwan
Semiconductor Manufacturing Company (TSMC), SK Hynix and Samsung
electronics. Unfortunately, he said he was a bit underweight
there, so it has affected performance, but he is neutral now on
emerging markets tech.
In the US, his exposure is broader, which includes tech and AI,
financials and healthcare. He is also neutral on European
equities, and likes banks and healthcare. In fixed income,
Jaubert likes duration and high yield. He is slightly overweight
in duration and neutral in high yield. “It’s a bit tricky with
French bonds due to the elections in 2027 and there is a lot of
volatility,” he added. “We are diversified between the US and
Germany in duration and have some investments in Italian bonds.
We also like high yield.”
High yield
Martin Reeves, head of high yield at MIFL, said at the event that
the risk of defaulting in the high yield market has been the
lowest it has ever been. “The returns won’t be as high but the
risk is lower,” he added. He is overweight in UK high yield, as
it is an unloved market and cheaper than others. “We like Boots,
Iceland, David Lloyd Centres, and Stonegate that are performing
well. The UK economy is actually performing well for these
companies. If the UK economy goes into recession, these companies
would be badly hit, but we don’t think that will happen,” he
continued.
“We are underweight in French high yield. Most of the companies
are actually fine but it’s uncertain what the economic outlook
will be and the prices are too high. If the prices were lower, I
would invest in them,” he said. “I am neutral on German and
Italian high yield. We are also underweight in the US as prices
are too high and overweight in Asia. We prefer the UK, we prefer
parts of Europe and parts of Asia and Latin America.”
At the event, Giorgio Carlino, head of multi-management at MIFL,
also said he is positive on equities and fixed income, but more
positive on fixed income. He sees opportunities in duration,
notably in Germany and the US. He is also positive on gold,
reaching 10 to 15 per cent in some of the firm’s portfolios,
saying that the demand is there.
Furio Pietribiasi, CEO of Mediolanum, also sees strong growth in
Asia and emerging markets as well as good investment
opportunities in the region. He is positive about the outlook.
Patrick McKenna, deputy head of portfolio management at MIFL said
they are selling US tech for Asian tech. “It’s been a positive
year for active investors in emerging markets,” he said. He likes
Poland, which has a thriving middle class and strong economy, as
well as Latin America. “One of the biggest contributors was also
Greece this year but they have now been defined as a developed
country,” he continued. McKenna also highlighted the importance
of Taiwan and Korean stocks; likes India, although it has
struggled in the last 18 months and is sensitive to higher oil
prices caused by the conflict.
Jaubert explained the advantages of expanding in
Ireland this year: it is more international, there are tax
benefits and it is an English-speaking country. Ireland is the
third largest investment fund domicile for funds after the US and
Luxembourg, hosting over €5 trillion of funds ($5.6 trillion), an
increase of 41 per cent since 2022.
MIFL is a management company approved by the Central Bank of
Ireland to manage UCITS or undertakings for the collective
investment in transferable securities, which are investment funds
regulated at EU level, and non UCITS funds. See more about the
firm
here.