Japan and Europe, where aggressive QE programmes are underway, are both attracting the investment allocations of a Baring fund, while it has shed its US exposure.

While some economists and investors might wonder what will be the long-term effect of large-scale central bank quantitative easing – printing money in old-fashioned language – it appears that the European and Japanese QE efforts are so far appealing to investors.

Certainly, Baring Asset Management likes European equities, European property and Japanese equities. The firm’s Baring Euro Dynamic Asset Allocation Fund, for example, has made a large shift in its stance: it has since last summer shed its US equity exposure and shifted money into the eurozone. The fund also has a “sizeable” exposure to Japanese stocks.

Both the European Central Bank and Bank of Japan have engaged in QE to bolster their respective flagging economies – but there remain question marks as to what extent such a ploy, unless allied to radical restructuring of the economies, will prove successful.

“Our European position also includes a 10 per cent allocation to European small caps which we believe will benefit from the more positive economic environment indicated in the recent economic data,” Hartwig Kos, investment manager at the fund, said in a note.

The fund, which marked its second anniversary in March, has returned 10 per cent since inception on an annualised basis, and 21.55 per cent on a cumulative basis. It has  outperformed the 3-month EURIBOR +3 per cent per annum, which has delivered a return of 3.2 per cent and 6.65 per cent respectively. At least half of the fund’s exposure is in euros.

The fund also has exposure to European high yield bonds, because Barings believes this asset class will benefit as investors hunt for returns in a world of low interest rates. It also is attracted to the very low risk premia in Brazil and Russia.

“Another theme in the portfolio is our allocation to European property. While we do not yet see any overall inflation in Europe, we do see asset price inflation due to a mismatch of interest rates – the ECB benchmark rate is too low for the economic conditions in Germany and other northern European countries, so property prices and credit are booming in those regions. To capture this opportunity, we have taken positions in a number of real estate investment trusts across northern Europe.”

Elsewhere, Barings has also allocated a sizeable allocation to Japanese equities, as it believes Japan remains an attractive proposition thanks to its stimulative monetary policy and strong earnings.