Scott Spencer and Anthony Willis at the Columbia Threadneedle Investments multi-manager team take a look back at the quarter for the macroeconomy and financial markets as well as the outlook and fund performance.

Experts at Columbia Threadneedle Investments remained optimistic this week for Asian assets in 2023.

Speaking at a media briefing in London, Scott Spencer highlighted how the first quarter of 2023 was positive for most of the asset managers funds, driven by increased exposure to bonds. “The decision to increase bonds and duration at the end of 2022 came good,” he added. 

The funds include Columbia Threadneedle Multi-Manager Navigator and Columbia Threadneedle Multi-Manager Lifestyle ranges.

“In 2023, we have so far had a reasonable start to the year, seeing positive returns for the quarter, despite the serious market turmoil,” he said. 

“We had positive news with the reopening of China after its zero-Covid policy and a decline in European natural gas prices,” he continued. But he questioned whether this could last. “It looks difficult as indicators point to recession. It’s hard to get more excited about risk assets now. There was huge volatility on the bond markets this year, due to the changing outlook for interest rates, but they did do marginally better,” he added.

“We were underweight in equities at the start of the quarter and reduced the allocation in the middle of the quarter to increase the underweight,” he added. “We are overweight in bonds, although we do expect a lot of volatility on the market. We also have a small position in gold in the lifestyle funds, as it helps to diversify the portfolio, and does well in times of high inflation,” he added.  

Outlook
“The first quarter shows that interest rates hikes have consequences not least in the banking sector,” Anthony Willis continued. “March saw the consequences of those higher rates feeding into the banking system, with the collapse in Silicon Valley Bank and the spread to Credit Suisse,” he added. But he believes that UK and European banks are in a better position than the US.

He expects the West to see recession, but the depth of it looks less serious than at the start of the year, with the fall off in energy prices playing a big part in this.

He also highlighted how inflation has peaked and geopolitics remain uncertain, notably concerning events in Ukraine and the deteriorating relationship between the US and China, which he believes is probably a long-term theme.

He has made no real major changes to the positioning. “Our portfolios remain underweight in equities, and overweight in bonds and cash. Our regional views also remain unchanged. We continue to favour Asia and we are neutral in emerging markets and Japan, and underweight in the eurozone, the US and the UK,” he said. “We are cautious but not bearish,” he added.

Meanwhile, Spencer sees opportunities in fixed income and in value funds, which outperformed last year. “We still think we have a long journey on that trend. Our portfolios have healthy exposure to value,” he added. “We also see opportunities in small-mid caps, after the huge sell off last year, given the concerns about recession. This is a good entry point for small-mid caps,” he concluded.