According to the 2015 Global Portfolio Barometer report of 855 moderate risk or balanced portfolios across seven different regions, France took top spot with average 2015 returns of 7.6%. It did, however, also top the tables in terms of annualised risk score around 9%.
In second place was the UK which returned investors 5.3% on average in 2015, only 0.1% more than Italian investors received, but at a decidedly lower risk.
Investors in Singapore(+3.5%) and Spain (+2.0%) found themselves in the middle of the table, but in positive territory, while LatAM and US investors found themselves worse off, with the Us bottom with an average decline of 0.9%.
The reason behind the significant regional discrepancies stem largely from asset allocation tendencies.
Source: Natixis Global Asset Manangement
A focus on fixed income
French allocators demonstrate a preference for European equities and risk-managed products, Natixis’ research showed. And, at 15% have the lowest average allocation to fixed income.
According to the group: “The classic 60% equities, 40% fixed income model remains largely intact in countries such as the US, UK and Singapore.”
But, it added, the main deviation from this is that in the US and UK, fixed income allocations are increasingly being replaced by alternative and asset allocation funds.
While this may make sense given concerns around holding duration, Natixis said, “it alters the risk and correlation dynamics in their portfolios by replacing a traditionally negatively correlated asset class with historically less volatile but more correlated assets such as ‘balanced funds’ and ‘absolute return funds’”
In Italy, Spain and Latin America, Natixis reported a steady reduction over the past two years in their fixed income allocations from around 50% to 40% and an increasing move away from holding individual bonds toward specialist bond funds.
Allocation funds
French allocators are different, however, Natixis said, “Invstors in France benefit from being able to invest in a high interest paying cash-like product called Fonds En Euros that sets a “risk free” benchmark for all other asset classes to beat.”
They also favour utilising allocation or “patrimonial” funds in significant size, Natixis said.
“These funds, which include a combination of asset classes, have characteristics similar to the overall moderate portfolios themselves, and do not always offer the diversification benefits expected. They form nearly one third of French portfolios, a far greater proportion than elsewhere.”
