ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Asset manager pessimism on US and EM deepens further

Return expectations from US equities among asset management companies are at a post-financial crisis low. EM equities may look cheap after last week’s correction, but asset managers have their reasons to stay sceptical.

As the Russell 2000 Index fell by more than 10% in August, including a 13% drop from 13 to 18 August, the outlook for US small caps is pitch-black, according to the latest EIE Fund Manager Sentiment Survey. Asset managers deem losses on their investments in the asset class even more likely than government bonds producing negative returns in the following 12 months. US large caps are slightly less unpopular, with two fund companies even expecting the asset class to deliver positive returns.

 

 

 

 

 

 

 

While faith in European equities is seemingly unscathed despite last week’s violent market movements, return expectations for emerging market equities are at their lowest since the first quarter of 2014. Even though both global EM and Asia ex-Japan equities have underperformed developed equities for the past three years, asset managers remain sceptical about the returns local stock markets can deliver in the short term.

EM debt surge: a mounting problem

As emerging market economies have become more reliant on consumption to drive economic growth, this shift has been accompanied by a surge in private debt. “A high level of private debt as such is not necessarily a problem, but if the debt to GDP ratio increases rapidly, it’s often a sign people are taking on more credit than they can afford,” says Chris Jeffery, an asset allocation strategist at LGIM, one of the asset management companies with a bearish outlook on EM equities.

MORE ARTICLES ON

  • Can M&A and buybacks breathe life into UK market?

    Can M&A and buybacks breathe life into UK market?

    Both buybacks and M&A should help realise value in UK shares, boosting prices and giving investors another reason to consider the UK stockmarket Not only does M&A activity appear to be picking up, with a high-profile bid for UK electronics retailer Currys, but the scale of company buybacks continues to accelerate. If it goes well,…

  • Capital Group launches multi-thematic Article 8 funds

    Capital Group launches multi-thematic Article 8 funds

    Capital Group has launched a set of multi-thematic sustainable funds that are available for investors in Europe, writes Christian Mayes. The Capital Group Sustainable Global Opportunities fund (LUX) will invest in global equities, while the Capital Group Sustainable Global Corporate Bond fund (LUX) will target fixed income exposure. The launch also includes a multi-asset offering…

  • Bond funds pull in €29.7bn in January – LSEG

    Bond funds pull in €29.7bn in January – LSEG

    Bond products were the best-selling asset class in January, according to LSEG Lipper’s European Fund Flow report, writes Christian Mayes. The asset class pulled in a net €29.7bn in the month, while Money Market USD grouping was the best-selling Lipper Classification after receiving €11.2bn inflows. Providers of mutual funds pulled in €22.5bn, while passives saw net…

  • Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    A quarter of all Article 8 funds could be accused of greenwashing based on their sustainability framework and practices, according to MainStreet Partners, writes Christian Mayes The 24% of funds classified as a greenwashing risk by the 2024 ESG Barometer report marks a four percentage point increase from the 20% flagged at the end of…

  • EU green rules could stymie decarbonisation projects – ExxonMobil

    EU green rules could stymie decarbonisation projects – ExxonMobil

    The European Union’s climate regulations may lead to it halting its investments in Europe, ExxonMobil has warned. Speaking to the Financial Times, Karen McKee, president of the product solutions division, said the oil and gas giant had struggled to begin decarbonisation projects in Europe due to the regulatory burden. The result, she added, was that…

  • ICE flags need for Europe to double green investment

    ICE flags need for Europe to double green investment

    Investments to modernise energy and transport must double by the end of the decade to reach 2030 climate targets, the EU has been warned. According to the Institute for Climate Economics (ICE), which has released the European Climate Investment Deficit report, the bloc lacks what it calls a “consistent tool” to ensure monitoring of the…