Aquila Asset Manager Index.

2nd quarter 2019

August 13, 2019

How asset managers deal with rock-bottom interest rates

Independent asset managers in Switzerland have had a surprisingly good first half of 2019. They expect interest rates to continue falling and are aligning themselves accordingly - also with equities.

Almost one-third of independent asset managers (external asset managers, EAMs) in Switzerland are convinced that the Swiss National Bank (SNB) will cut its negative interest rates further. This view strengthened significantly in the second quarter of 2019, up from just twelve percent in the first quarter of 2019 (cf. graphic).

This is according to the latest Aquila Asset Managers Index (AVI), published by the Swiss Aquila Group every three months in cooperation with finews.ch published. The index summarizes various forecasts from independent asset managers in Switzerland. A good 140 firms took part in the latest survey.

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Against the background of this challenging situation, EAM is also realigning its investment strategy. They intend to focus increasingly on precious metals and gold. The proportion of planned investments in this asset class increased to 6.5 percent (previous quarter: 5.9 percent). However, it is also interesting to note that the independent asset managers intend to increase their share of equities to 15.0 percent - up from 14.2 percent in the previous quarter (cf. graphic).

"The continued accommodative monetary policy of central banks ensures that equities have no alternative for the time being, despite geopolitical uncertainties and cooling global growth. However, for this to remain the case, central bank measures need to be complemented by productivity-enhancing structural reforms, especially in the euro area," says Julius Tintelnot, partner at Tintelnot, Aquila & Partners, which serves middle-market entrepreneurs and international families.

 

Major corrections

Similar conclusions are reached by Giovanni Bartolotta, managing partner at Active Advisory Partners. He says: "We have slightly increased the equity allocation in all investment strategies. We believe that the willingness to intervene on the part of the Federal Reserve (Fed) will prevent larger corrections. This is at least on a time horizon of three to six months."

"That the Fed safety net will continue to work in the long term depends on investors' confidence in this same Fed and whether they believe that expansionary monetary policy can compensate for the disadvantages of protectionist measures. That's why we review the tactical increase in equity exposure on a quarterly basis," Bartolotta added.

 

Further precautions

Changes are also evident in the geographic "asset allocation": the share of investments in Switzerland rose to 19.1 percent in the second quarter (18.5 percent in the previous quarter) - in line with further precautions, the independent asset managers reduced the European equity quota to 8.2 percent from 8.9 percent in the prior-year quarter. This was in favor of the U.S. market, where the share rose to 9.0 percent in the second quarter of 2019, up from 8.6 percent in the previous quarter (cf. graphic).

 

More new money

Looking back, the first half of 2019 has left a positive mark on the books of independent asset managers. Rising share prices between January and the end of June 2019 not only led to an increase in assets under management for 55 percent of respondents, but also to a significant increase in new money. Finally, strong market performance was also important to growth for 37 percent of survey participants (cf. graphic below).

Against this background, it should not come as a complete surprise that many EAMs are still positive about the coming months. Exactly 36 percent (32 percent in the previous quarter) of those surveyed expect business to develop well within the year. And 32 percent (29 percent in the previous quarter) even want to expand their workforce.

In three months, Swiss asset managers see the SMI averaging 9,693, gold at just over $1,392 an ounce and the euro at 1.11 francs.

 

The next AVI Index will be published at the beginning of October 2020.

 


Contact: Nicolas Peter, Head Asset Management Phone: +41 58 680 60 42 Source: Finews AG, Zurich

Disclaimer: Information and opinions contained in this document are gathered and derived from sources which we believe to be reliable. However, we can offer no undertaking, representation or guarantee, either expressly or implicitly, as to the reliability, completeness or correctness of these sources and the information provided. All information is provided without any guarantees and without any explicit or tacit warranties. Information and opinions contained in this document are for information purposes only and shall not be construed as an offer, recommendation or solicitation to acquire or dispose of any investment instrument or to engage in any other transaction. Interested investors are strongly advised to consult with their Investment Adviser prior to taking any investment decision on the basis of this document in order to discuss and take into account their investment goals, financial situation, individual needs and constraints, risk profile and other information. We accept no liability for the accuracy, correctness and completeness of the information and opinions provided. To the extent permitted by law, we exclude all liability for direct, indirect or consequential damages, including loss of profit, arising from the published information.

Disclaimer: Produced by Investment Center Aquila Ltd. Information and opinions contained in this document are gathered and derived from sources which we believe to be reliable. However, we can offer no under-taking, representation or guarantee, either expressly or implicitly, as to the reliability, completeness or correctness of these sources and the information pro-vided. All information is provided without any guarantees and without any explicit or tacit warranties. Information and opinions contained in this document are for information purposes only and shall not be construed as an offer, recommendation or solicitation to acquire or dispose of any investment instrument or to engage in any other trans action. Interested investors are strongly advised to consult with their Investment Adviser prior to taking any investment decision on the basis of this document in order to discuss and take into account their investment goals, financial situation, individual needs and constraints, risk profile and other information. We accept no liability for the accuracy, correctness and completeness of the information and opinions provided. To the extent permitted by law, we exclude all liability for direct, indirect or consequential damages, including loss of profit, arising from the published information.

Aquila Flash

Review 2023 - Outlook 2024

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In 2023, numerous geopolitical risks came to the fore, supplemented by interest rate hikes by central banks in the fight against inflation. The conflict in Ukraine will soon last two years. In addition, the situation in the Middle East has worsened, particularly between Israel and Hamas. An escalation of the conflict to neighboring Arab countries has been prevented so far. Economic weaknesses are also evident in two of Switzerland's key trading partners: China and Germany. These developments are leading to a lack of important impetus from foreign trade. Geopolitical issues will continue to play an important role in the coming year. However, the past has shown that the impact of such events on the global financial markets is often short-lived.

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