Multi-Asset Quarterly Update

Speaker 1: Hi and welcome to another quarterly investment update on our multi-asset core funds. This video is for clients that invested into Aviva investors multi-asset funds or for those who would like to learn more about them? Joining me today is Guillaume Payen, who is one of the portfolio managers for our multi-asset funds? Thank you so much for joining us today. Shall we start with the key themes that affected the market in this quarter?

Speaker 2: Yes, sure. So the first theme is that inflation is is improving. It's it's coming down. You know, we were at double digit inflation prints last year. Things are definitely improving, but more slowly than potentially we were expecting. One thing that happened during the quarter was the rise in oil prices. Oil prices were up 30% over the quarter, so a very large increase. And that was driven by one factor, which is effectively Russia and Saudi Arabia announced that they were going to tighten the supply quite aggressively and effectively. That's definitely something that means that potentially inflation is going to continue to come down, but potentially more slowly than central banks, you know, want. And that brings us to our second theme, which is that the idea that interest rates are a peak, we've seen relentless rise in interest rates for the last year and a half. And, you know, we've reached very high level of interest rates, you know, almost levels we haven't seen in Europe in the US for for 20 years. So the good news is that central banks are sort of starting to slow the pace. They are indicating that, you know, we're close to the peak in interest rates. But the flip side of that is that or the bad news, if you like, is that central banks are also saying they might need to keep interest rates higher for longer.

So decided that, you know, monetary policy is going to stay restrictive until higher interest rates effectively feed through the economy. What we're seeing at the moment is that, you know, people necessarily haven't always refinance their mortgages at higher interest rates? Corporates haven't really refinanced their debt at those higher interest rates. So what we're seeing and this is really my third theme is around global resilience. Economies tend to surprise on the upside, you know, especially in the US. You know, unemployment rates still very low in the US driven by the service sector. And so, you know, we're seeing that that global resilience that is definitely supporting equity markets. But effectively it's still a case of, you know, being in a delay of of those interest rate increases.

Speaker 1: Given your last key takeaway on the global resilience and inflation and interest rates that you just discussed. Could you share how markets and our multi-asset funds have performed given those trends?

Speaker 2: Yeah. So it's been a bit of a mixed quarter for asset markets. Equities have actually done very well over the quarter, driven by stronger than expected economic data, if you like. Fixed income markets, you know, have been fairly weak. You know, this strong rise in yields, in fixed income bonds. Bond prices falling, falling effectively, especially over August and September. So when it comes down to our multi-asset core and plus funds, the funds that have got higher allocation to fixed income, F1, F2, I've had small negative returns around one half to 1% negative, whereas the funds with higher equity content have generally done better and all the funds are doing okay year to date and all posting positive returns, you've really seen that divergence between equity and fixed income over the quarter. We've seen regions like Japan in equity market doing very well, still supported by sort of secular improvement that we're seeing in this economy. So there's definitely pockets of positive news in some of those regions.

Speaker 1: Thank you. That was really interesting. Finally, shall we leave some takeaways for our viewers today? What are the key takeaways?

Speaker 2: As I said, you know, we don't really see recession in the near term. It's still going to take a while. So from that perspective, with economic growth remaining sort of fairly strong, there's still some upside for equity markets. So we remain positive on equities. We've been overweight equities for most of the year. We've taken a bit of profits over the last few weeks just just because of the turbulence in interest rates. But we think that overall the dynamic is still positive for equities and even in fixed income. Now, with the rise in yields, you know, if you're selective in sort of the regions that you choose, you know, we've been buying Australian bonds which are being more attractive now. We like also UK gilts. We think regions that are more sort of mature in terms of the interest rate cycle potentially will benefit, especially if, you know, equity markets are getting a bit more turbulent as we getting towards the end of the cycle. We think that fixed income will play a part in the portfolio as a protection for for your equity holdings. So yeah, that's where we position now.

Speaker 1: Thank you, Jim. That was really interesting. So to summarize, inflation continues to slow but slower than expected. It said the interest rate approaching to that peak. Global economies remain resilient. And this concludes our investment update for the third quarter. We'll be running a similar video for next quarter Q4. If you require any further information or market views, asset allocation or performance, please get in touch with your regional client solution manager. Alternatively, give us a call using our website or send us an email and we will address your inquiries as soon as possible. Once again, thank you for joining us today and we will look forward to seeing you next time.

 

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