As investors are looking at the world’s central banks to come to their rescue and are divided between keeping a closer eye on macroeconomic developments and focusing more on stock-picking, fund selectors increasingly seem to be looking for the exit, at least in Munich.
Alternative equity in fashion
Alternative equity products are more popular with fund selectors in the Bavarian capital than any other asset class. The number of fund buyers who say they will step up allocation to European equities has come down to just 39%. By contrast, some 56% of delegates attending the symposium indicated they will increase their allocation to Alternative Ucits equity funds, while none will cut exposure.
Do valuations matter now?
European equity long/short manager Richard Brown represented the macro-side of looking at things, making the case for swift central bank intervention to shore up asset prices again. “If you look at the latest sell-off, it was clearly triggered by comments made by Mario Draghi and the German finance minister one after another at the same conference, as they unintendedly said very different things.”
As markets are now focused on this kind of things, valuations do not matter anymore, Brown said. “What we need to get out of this negative sentiment is action from the central bank.”
However, there is a point to make that, volatility having been so low for an extended period, asset 
prices do not reflect their true value at the moment. Jonathan Pines (pictured), Asian equity manager for Hermes, argued valuations now count more than ever. “If you ask me, valuations are the only thing that matter. It is impossible to know when a bull market is going to end. And 10% price movements don’t have a dramatic impact on the question whether things are attractive or not anyway.”
Delegates go for large caps
Delegates seem somewhat confused. They haven’t seen a clear beneficiary of the recent ECB actions, with one in five even believing nothing benefited from the slashing of its main interest rate and the new bond purchasing programme, though they trust German economic growth will soon resume. As far as developed equities are concerned, they have a clear preference for large cap stocks, possibly because they tend to be less volatile than small caps.
What do you prefer?
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