Deutsche Bank Wealth Management is set to expand its recommended fund list by adding equity products, in light of its improving outlook on global stock markets.
The firm sees long/short hedge funds as a particularly good bet, but is also eyeing more macro managers and considering smart beta and risk premia strategies, said Joyce Ngan, Asia-Pacific head of fund solutions.
The fund list chiefly comprises fixed income and some multi-asset funds at present, she told AsianInvestor, “so it is relatively short compared to what we would expect it to be going forward”.
The MSCI All Country World Equity index has gained nearly 5% – with the US stock rally a big driver of that – since Donald Trump was confirmed as US president on November 9. That said, US equities have stuttered in recent days, but the consensus remains generally positive, given Trump’s plans to cut taxes and introduce business-friendly measures.
However, there are widespread global concerns and protests over Trump’s trade and immigration policies, including his travel ban on people from seven Muslim-majority countries.
Nonetheless, Ngan said: “Our views toward equities have become more favourable, so we are slowly shifting into equities, after having been very under-allocated [to the asset class]. The list should become larger, because investment opportunities have widened.”
She expects a list of 20 to 30 products to be sufficient, spanning exchange-traded funds, mutual funds, absolute-return Ucits strategies and hedge funds. Excluding US products, Deutsche has about 300 funds on the global approved list, managed by about 40 managers.
Ngan took on her current role in November, replacing her former boss Karen Tan, who departed after a decade with the firm.
Long/short favoured
With regard to hedge funds, Deutsche WM likes long/short strategies and will continue to add those to the list, said Ngan. Such products can both capture long-term changes and also help cope with immediate-term volatility, she added. This is despite negative sentiment about the asset class among many institutional investors.
The firm has put out a request for a long/short technology fund, because that sector is undergoing major changes. “We also like multi-strategy credit, given we are in the tail end of the [credit tightening] cycle.
The bank is also long-term bullish on the global healthcare sector, given global ageing demographics and long-term structural changes expected as a result of innovations.
“But it’s a rocky road for this sector going into 2017, and we’ve been figuring out how to cater for clients with a much longer investment horizon,” noted Ngan. “Currently we have a long-only approach that we implement through exchange-traded funds and mutual funds.”
Deutsche WM is also looking for managers of macro strategies and considering smart beta and risk premia strategies, Ngan noted. “I want to understand if they [smart beta and risk premia products] will continue to perform well so we’re studying them now,” she said.
