2018 began with market tribulations caused by a growing series of global political controversies. 2017, on the contrary, will be remembered as the year of collapse of the calculated risk level of global portfolios and the concomitant increase in exposure to riskier assets. To underline the latter reality is the latest edition of Global Portfolio Barometer elaborated by Portfolio Research & Consulting Group (PRCG) of Natixis Investment Managers. In fact, according to the study, all regions at an international level, including Italy, have recorded a decrease in the level of riskiness of portfolios. In our country in particular, the low volatility and correlation of the various asset classes has pushed the Value at Risk of Italian portfolios to a minimum level never recorded before, below 1%.
ASSET ALLOCATION: ITALIAN PORTFOLIO
Analyzing the portfolios in particular, the low level of risk was accompanied by interesting changes within the composition itself. In particular, there was an increase in the allocation towards riskier assets, with particular preference towards non-domestic shares. However, this does not apply to moderate Italian portfolios, whose asset allocation at the end of 2017 was unchanged compared to that of the end of 2016, despite the changed market conditions.
MULTI-ASSET FUNDS STILL LEADING
Compared to the European benchmarks, Italian investors confirmed their preference for European assets, due to the exchange rate risk (especially against the US dollar) inherent in the allocations that replicate the reference indices. Multi-asset funds, or funds with dynamic asset allocation, however continue to have a prominent place in Italian portfolios, where they represent on average around a quarter of the asset allocation.
Alessandro Marolda, senior analyst of the PRCG of Natixis Investment Managers underlines: “While in past years the decision to focus on European assets had proved counterproductive, the recent European outperformance has helped some Italian portfolios beat traditional benchmarks in risk-adjusted terms, especially in 2017. Overall, even multi- assets achieved good results, thanks to the good performance of traditional assets”.
Although alternative strategies offer the allocation with the least correlation to traditional asset classes, Natixis points out, they are used significantly less in Italian portfolios than in multi-asset funds. However something is changing.
Antonio Bottillo, country head for Italy of Natixis Investment Managers, declares: “Since the beginning of the year the indices have moved from historic lows of volatility to above average levels. Compared to 2017, the context has changed. Investors are gradually moving away from bonds to approach alternative strategies. In the equity field. In light of the current environment, investors have started to think more carefully about diversification in equity segments and we have seen growing demand for more flexible equity strategies that can vary exposure to equity risk; meanwhile, other factors have also emerged in the equity landscape – for example ESG funds (based on ethical, social and governance principles).”
