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Monaco fund buyers seek safe havens

The local fund selector community is comprised almost exclusively of (multi-)family offices and private alt=''banks, whose wealthy and often financially sophisticated clients have a strong demand for alternative strategies. Therefore the fund selectors met by our researcher on her trip to the Principality last month all indicated they will increase their allocation to absolute return, an exceptional unanimity never registered by EIE research before.

Multi-strategy tops the list

Among the different alternative Ucits beasts, multi-strategy funds and long/short equities are the most popular, with respectively 92% and 91% of interviewees saying they will increase their allocation in the next 12 months. Global macro comes in third with 50% buyers, which is still much higher than in any of the other six European countries we have been collecting data from this year. The two main drivers behind the popularity of absolute return are the record-low bond yields leading investors to consider higher-yielding returns with a lower risk-profile than long-only equity funds and demand from clients, which is predominantly a result of the former.

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Bond status quo

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Even though all of Monaco’s fund buyers are increasing their exposure to absolute return funds, they are not massive sellers of bonds. Only developed market government bonds are being sold off: 31% intend to decrease their exposure. But for investment-grade corporate bonds, high yield bonds and emerging market debt, allocations are to be held quite stable. Still, net sentiment (buyers minus sellers) is net negative for all bond categories, except for investment-grade corporate bonds, where buyers and sellers are evenly matched at 15% of the vote each.

 

QE boost

Monaco’s fund selectors mightr be stocking up on absolute return funds, that doesn’t mean they are alt=''risk-averse. They are still joining in with the flavour of the day: European equities. Exactly like most of their counterparts in the rest of Europe, they expect European stocks to outperform on the back of the ECB’s QE programme. But they are even more convinced about it than fund selectors in any other part of Europe: some 86% say they will increase their allocation to European equity funds. The cheaper euro which has been one of the major short-term consequences of the monetary policy easing was mentioned as a big plus for eurozone equities. Monaco’s fund selectors think it will especially benefit companies which export heavily to countries outside the eurozone. Peripheral eurozone countries are supposed to take advantage as well.  

Part of the Bonhill Group.