Fund selectors in Luxembourg are clear-cut about their favourite equity markets. EU and frontier market stocks lead the show, while Luxemburg-based investors cast doubt over the prospects for US and Japanese equities.
Two thirds of Luxembourg’s fund selectors, who typically cater high net worth individuals with over €1mln in investable assets, will increase their allocation to European equities during the next twelve months. The remaining third will keep their allocation unchanged. Fund selectors our research team spoke to mentioned the ongoing deleveraging process of European companies, leading to healthier balance sheets, as an important positive factor for the asset class.
Frontier markets catch attention
Frontier markets, a tiny but growing asset class accounting for only some 3% of the world’s market capitalisation, enjoy almost equal popularity. Two thirds of interviewees will increase their allocation while just 11 percent plan to reduce their exposure. Especially Vietnam and Nigeria, countries with a large domestic market, were mentioned as markets with attractive return prospects.
Undecided on US, Japan and bonds
Luxembourg fund selectors are ambiguous in their views on most other asset classes. A striking three quarters of respondents is neutral on Japanese equities. Investors are also net neutral on US stocks, with 50% planning to keep their allocations unchanged, while quite some interviewees see a correction on the US stock market coming up within the coming months.
Fund selectors are also undecided about developed market bonds, with a large majority keeping their allocations unchanged. They seem more keen on emerging market debt. Almost half of respondents will increase their allocation to EM corporate bonds, while a third plans to do so for EM government bonds.