In light of the current geopolitical situation and a renewed focus on investing in Europe, Quintet Chief Investment Officer, Daniele Antonucci, shares how the private bank is responding to current times.
Quintet has spoken recently about a “multipolar landscape.” How are you repositioning portfolios to capture Europe’s renewed industrial and geopolitical agenda?
The way we invest in this context is broader than just looking at Europe or any other region. We invest through a strategy of portfolio diversification: if there’s a wobble in one part, for example emerging market equities because of tensions in the Middle East, then commodities might benefit as oil prices rise.
On Europe specifically, we think there is more fiscal leeway than in other developed regions: government debt is about 65% of GDP in Germany, for example, while it’s over 100% in the US, so we’re overweight European government bonds and underweight US Treasuries. In equities, to reflect these long-term European themes more strategically, we typically own a higher share of Europe relative to its weight in global markets.
European investors are increasingly balancing geopolitical uncertainty, energy transition priorities, and economic competitiveness. How is this changing portfolio construction conversations with clients? In a market environment dominated by short-term headlines and such uncertainty, is it more challenging to convince clients to remain disciplined, long-term investors?
We always go back to our investment philosophy, which is based on staying invested to compound returns at medium horizons in a diversified manner. Investors need enough liquidity for near-term needs and enough risk exposure for long-term goals. Staying structurally underinvested can be costly if earnings and innovation remain supportive. That is why diversification is central.
Staying structurally underinvested can be costly if earnings and innovation remain supportive.
It is the practical bridge between caution when volatility rises, increasing near-term downside risks, and participation to the upside that staying invested in the markets typically offers at longer horizons. We prefer portfolios that can work across scenarios, rather than portfolios that rely on one prediction being exactly right.
Europe is simultaneously pursuing competitiveness, energy security and decarbonisation. How do you assess sustainable investing mandates today?
Rather than one-size-fits-all, our solutions give investors the option to choose how they want to invest, including in a sustainable manner and to what degree. One of our strategies we developed jointly with BlackRock, Future+, provides clients with a higher degree of sustainability than traditional strategies. At the same time, it innovates via the inclusion of a global equity sleeve that focuses on long-term structural themes that are connected with sustainability, including clean energy and the circular economy.
Quintet’s recent outlook highlighted AI investment as one of the defining themes for the coming decades. Where do you see the most compelling Europe-based investment opportunities emerging from the AI buildout?
The US remains central to the AI investment cycle, spanning semiconductors, cloud infrastructure and parts of the software sector. We still see capital spending in this area as supportive, particularly in the US and China.
Europe is less exposed to this theme, at least for now. But there are also opportunities within Europe when investors look beyond what we label ‘enablers’ of AI and focus on the ‘beneficiaries’ of AI. The former are essentially technology companies, predominantly outside of Europe, while the latter can be found in any region, including Europe, and are firms that use AI to gain a competitive advantage in their own sector, ranging from industrials to financials and consumer sectors.
How are you thinking about strategic asset allocation as Europe attempts to reduce dependence on both US policy cycles and global vulnerabilities?
This goes back to the earlier point on global diversification. Strategically, in different proportions, we think there’s space in portfolios for both the US and Europe, along with many other asset classes. We seek to capture opportunities wherever we can find them, and to mitigate risk wherever it comes from.
The other angle is market concentration: one country (the US), two sectors (information technology and communication services) and just a few companies (the ‘Magnificent 7’ and a handful of other firms) represent a large share of the market. So, it makes sense to us to explore ways to invest in other areas that are underrepresented and where valuations are less expensive, including Europe.
This article was published in the 10th edition of Forbes Luxembourg.
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