But while most risk assets have managed to deliver positive real returns so far this year, the broader backdrop remains challenging – as the full impact of central bank efforts to clamp down on inflationary pressures has yet to be felt.

In the face of ongoing uncertainty, six investors outline their thoughts on markets for the final quarter of the year and beyond.

Not a time for major calls

By Niall O’Sullivan, chief investment officer, multi-asset strategies, EMEA at Neuberger Berman

We have greeted this year’s equity market rally with some trepidation. While strategic asset allocations have done well, we have been cautious as equity markets appeared to diverge from economic fundamentals.

Initially, each month of divergence increased our concern about market levels, especially as investors were being paid to be patient by cash and short-term bond yields. Eventually, however, the balance between tactics and strategy made us recognise the near-term momentum was too strong to fight against, even as we held onto our medium-term outlook. By mid-year, we were shifting to neutral. But a ‘neutral’ view does not mean a portfolio has to be static.

What can be done to eke out incremental excess return opportunities? One place to look is within, rather than among, asset classes. For example, in equities, regional tilts can be explored. Japanese equities still appear attractively valued in a policy environment that remains very accommodative next to other developed markets, even after the Bank of Japan’s recent adjustments to yield-curve control.

No free lunch from here

By Andrew Lake, head of fixed income at Mirabaud Asset Management

The big danger right now is that inflation does not come down. Given people are not losing their jobs and consumers continue to spend, we must at least consider the scenario that inflation does not fall as quickly as expected.

One consequence of this would be the Fed continues to hike rates and a potential policy error occurs as they overtighten into a market that is already weakening – triggering a recession. The Bank of England could be going this way.

Overall, it is a tough environment and views are quickly flip-flopping between bull and bear. Right now, the government bond bears seem to be winning with forecasts of a ‘Goldilocks’ scenario and no recession. But the flip side of that is higher treasuries, which would cap equity market performance, so sadly there is no free lunch for investors with either scenario.

Expect greater market breadth

By Scott Berg, portfolio manager of the T Rowe Price Global Growth Equity strategy

Equity markets have performed well this year, but much of the gains have been concentrated in US mega-cap technology stocks.

In our view, rapid technological change, Covid, and geopolitical conflict are creating the setup for a bumpy ride going forward, where grinding out returns will be important. Markets will increasingly reward those companies that can withstand an economic decline and maintain or expand profit margins.

With the era of low interest rates, low taxes, low wage growth, cheap commodity prices, easy technological gains, and deflationary globalisation now passed, this will have implications for profit margins for all companies. While the first eight months in 2023 have somewhat hidden this theme, as mega‑cap technology companies have exerted a strong influence on equity returns, this narrowness will inevitably fade to create greater market breadth.

Bonds again present value

By Phil Collins, chief investment officer, multi-asset at Sarasin & Partners

Rather than looking to China, global equity markets have fixated on the hype around generative artificial intelligence (AI). This has bid up a small number of technology companies into what could be a mini asset bubble. Just seven stocks account for the lion’s share of the rise in the S&P 500 this year.

For the first time in many years, we find that bonds present attractive value. Corporate bond spreads are attractive relative to historical levels, while government bonds are close to fair value in the US, Europe and UK. Higher yields, resilient company earnings and strong balance sheets make good-quality corporate bonds a viable alternative to equities, and we have been adding long-term income generators to the portfolios.

The higher returns now available on bonds prompt a rethink of the pros and cons of holding alternatives. As well as offering competitive returns, carefully selected bonds can also provide better liquidity and lower risk profiles than some alternative investments. Even cash is coming into its own once again, with low risk returns able to compete with absolute return strategies.

The golden trust opportunity

By Nick Greenwood, manager of MIGO Opportunities plc

The investment trust sector has recently witnessed a perfect storm in recent weeks, as a number of factors coincided to trigger a rapid widening of discounts across the entire space. We have reached the point where many commentators are suggesting recent events have sounded the death knell for investment trusts. This is a call that we have heard many times over the decades, but the sector continues to evolve.

A fundamental reason why the trust sector should prosper is that asset classes such as property, private equity and shipping cannot operate within an open-ended fund. It would be impossible to sell a fraction of an office block or a containership within twenty-four hours to meet a client sale.

We firmly believe we will look back at the summer of 2023 and reflect that it represented a golden opportunity to buy discounted investment trusts.

Boon for yield-curve strategies

By Robert Tipp, chief investment strategist and head of global bonds at PGIM Fixed Income

Interest rates have just migrated from a decade of ultra-low levels back to what may be a sustained period back ‘home’ in their long-term 3-5% range. The renewed higher level of yields should easily support investment grade returns in the mid-single digits, with high-single-digit returns likely on the higher-risk sectors – such as high yield corporates and hard currency emerging market debt.

Rather than a harbinger of recession, the inverted yields of many DM markets suggest investors’ collective psyche remains anchored in the low-rate era, convinced that rates will be lower in the near future. Just as investors never caught up with the 40-year secular decline in rates, the inverted curve could be with us for some time, leaving a boon for yield-curve strategies.

Furthermore, with the vast majority of rate hikes behind us, market volatility is set to fall. A re-emergence of the ‘search for yield’ is likely to follow, providing a tailwind for spread product and further boosting returns.

For more insight on UK wealth management, please click on www.portfolio-adviser.com

The fund is an equity investment fund with a six-month lock-up period, according to the company.

Investors must hold the product for a minimum of half a year and cannot redeem or sell the fund during the lock-up period.

The approval for sale of the first fund came only a week after the firm announced that FIL Fund Management (China) Company commenced business.

Currently, Fidelity has three offices in mainland China: in Shanghai, Dalian and Beijing, with over 1,900 employees.

Speaking at the opening ceremony of the fund management company, Helen Huang, managing director, said: “Relying on Fidelity’s deep experience in investment, pension and ESG, we are committed to combining a global vision with our local capabilities to provide a wide range of investment and pension solutions to Chinese investors to help them to achieve long-term financial goals.”

Neuberger Berman

The Fidelity fund comes just as US asset manager Neuberger Berman announced that its first retail fund in China has been approved for sale.

The China Guardian One-year Holding Bond Fund is a fixed income plus fund, which invests in domestic fixed income securities with a portion of the fund in equities.

“The investment strategy is based on Neuberger Berman’s experience in asset allocation in the global market,” said Patrick Liu, chief executive of Neuberger Berman Fund Management (China).

“Through the strategic allocation made by the investment team’s risk parity model and our active management ability, we aim to build a fund with a lower risk rating for investors.”

For more insight on asset and wealth management in Asia, please click on www.fundselectorasia.com

The New York-headquartered asset manager received approval from the China Securities Regulatory Commission (CSRC) to begin operations managing local currency mutual funds for domestic Chinese clients.

In June last year, BlackRock became the first foreign asset manager to be granted approval by the CSRC to start a wholly-owned onshore mutual fund business in China. Several other global asset managers such as Fidelity International and Schroders are also preparing to launch wholly-owned businesses in China’s mutual fund industry.

“We are honoured to be the second global asset manager approved to begin our mutual fund business operations in China. China is the world’s second largest capital market and the country’s commitment to opening up to high-quality financial services will bring significant opportunities for local investors,” said Patrick Liu, chief executive of Neuberger Berman Fund Management (China).

“Our long-term investment performance and ESG leadership were at the core of our mutual fund company application and will enable us to be a positive force for Chinese investors, issuers, markets and the global community.”

Neuberger Berman has been expanding its Shanghai-based team and recently hired Wei Xiaoxue as managing director of its subsidiary, Neuberger Berman Fund Management (China).

Wei will spend the first six months in her new role focused on the organisation’s strategic planning. Once this is completed, she will assume the role of deputy general manager and chief investment officer for equities at FMC.

For more insight on asset and wealth management in Asia, please click on www.fundselectorasia.com

Bhatia said the market turmoil of this year has altered the risk/return prospects for fixed income, the result of which means investors will have to adjust to “new realities” in 2023.

“Accelerating inflation and sharp monetary tightening for much of this year contributed to a sharp spike in fixed income yields,” he said.

“10-year Treasury yields surged to north of 4% before pulling back somewhat on a weaker-than-expected CPI print, agency mortgages increased to 5+% territory and high yield markets surged to over 8%,” he added. “Similar shifts could be found across fixed income.”

While from a historical perspective recent yields are not particularly high, Bhatia said they were perceived as “shocking” in contrast to the ultra-low levels of the covid era.

“As a result, investors are adjusting to the speed of this move and its implications,” he said. “For 2023, this means many may make significant changes to allocations both within fixed income and across portfolios, as they become more confident in their projections for inflation and policy, as well as economic growth.”

Source of growth

Within this broad movement, Bhatia said that Neuberger Berman anticipates three key trends that will affect fixed income assets going forward. Firstly that yield has returned to investment-grade, high-quality assets, secondly that bond sectors could be competitive with equities, and thirdly that we are moving from negative to positive real yields.

“Investors who 24 months ago wanted to achieve a 4% yield were often driven to high yield and emerging markets,” he said.  “However, today that’s easy to achieve with plain-vanilla intermediate to short-duration investment grade assets.”

“Thus, you could see the flipside of the post-Global Financial Crisis move down the quality spectrum, as investors seek more yield with less credit risk,” he added.

With higher bond yields, Bhatia added that investors may begin to look toward fixed income, not just as a diversifier and income generator, but as a source of growth.

“Given the risks associated with equities in a stressed economy, many high yield bonds, CLOs and other sectors may be worth a second look,” he argued.

Although recent trends may be softening, Bhatia believes the move from negative toward positive real yields is likely here to stay.

“This has a range of implications across asset segments—for the dollar, for equity valuations and fixed income across geographies and sectors,” he said.

“In the year to come, investors will likely continue to seek return based on relative value and opportunity; however, more basically, they will need to adjust to a changed market while understanding that we are likely moving back to norms that prevailed before the introduction of extraordinary monetary policy close to 15 years ago.”

The UK long-term savings and retirement business has promoted Bríd Meaney promoted to Heritage chief executive.

Meaney joined the group in 2021 and is currently finance director for its life companies division.

This comes as Andy Moss, life companies chief executive and heritage group director, has announced he will retire after 18 years at the company.

In other news, Jackie Noakes joins Phoenix Group as chief transformation officer.

She joins from the Bank of Ireland, where she served as group chief operating officer.

Eastspring Investments

The asset management business of Prudential has appointed Bill Maldonado as chief investment officer.

Maldonado joined Eastspring in September 2021 as head of equities.

BNP Paribas Asset Management

The French asset manager has named Mike Nikou as chief executive and head of distribution for Asia Pacific.

He will replace Steven Billiet, who has served as the firm’s Asia Pacific head after being appointed as head of the global client group in August last year.

Nikou was most recently a global partner at Antler, a global venture capital firm that invests in early-stage technology companies.

In other news, BNP Paribas AM has appointed London-based Mark Richards as head of flexible and absolute return within its multi-asset, quantitative and solutions investment division.

He joins from Jupiter Asset Management, where he was a senior fund manager.

Neuberger Berman

The investment manager has hired Niall O’Sullivan for a newly created role as chief investment officer of multi-asset strategies, Emea.

Most recently, he worked with Mercer Investments as chief investment officer of its outsourced chief investment office (OCIO) business for Europe, Middle East and Asia.

IQ-EQ

The financial services group has promoted Guernsey-based Alasdair McLaren to the newly created position of regional head of private wealth for the UK, Ireland and Crown Dependencies.

McLaren is currently head of private wealth for Guernsey.

Ocorian

The financial services group has promoted Michael Betley to global head of private clients.

Betley joined Ocorian in November last year when it acquired Trust Corporation International which he founded in 2003.

He succeeds Nick Cawley who is moving to a newly created role in the business setting up and chairing a global private client advisory board.

Tyndall Investment Management

Theresa Russell has been named as head of distribution at the independent investment house.

Prior to this, Russell was head of sales and marketing at GVQ Investment Management.

Lombard Odier Investment Managers

George Guest has been named as sales director in the firm’s UK wholesale team.

He joins LOIM from Impax Asset Management.

JP Morgan Asset Management

The asset manager has hired Dennis Yang as head of Hong Kong private bank distribution.

He most recently worked at Credit Suisse as a director, where he delivered both discretionary and advisory mandate solutions provided by Credit Suisse’s private banking and asset management divisions to private banking clients.

Evelyn Partners

The wealth management and professional services group has hired Sam Whatsize as a financial planner in the firm’s Nottingham office.

Whatsize joins from Brown Shipley, where he worked as a financial adviser in the firm’s Nottingham office.

In other news, Evelyn Partners has bolstered its Birmingham office with the appointment of Sarah Crowley as a financial planning director.

She joins from Brighton-based financial advisory firm IEP Financial, where she worked as an IFA for the past four years.

Lastly, Evelyn Partners has named Kjersti Wiklund as an independent non-executive director.

She is currently a non-executive director of Nordea and UK listed firms Spectris and Zegona Communications. She is also non-executive director of Babcock International Group, which she will step down from at the 2022 AGM.

Jersey Finance

Yiow Chong Tan has been named as business development director for Singapore at the promotional body.

Most recently, he was corporate finance director and board secretary at Hui Tian Network Technology.