It’s ‘risk-on’ time for Geneva-based independent asset manager The Forum Finance Group, which remains overweight equities at 51% of its total allocation.

In its 2017 mid-year review, former Citywire cover star The FFG said it expects the Eurozone to continue to surprise while the US economy has started to slow.

With this, the Geneva group has initiated new positions in frontier markets, European banks and US small caps.

While valuations are not cheap, they are not excessive either and are still much more attractive than those of debt instruments, it said.

This goes some way in explaining the group’s underweight to debt instruments, which represent 27% of its allocation.

A strong outlook

This strong position on equities was first set by the FFG at the beginning of 2017, but the group has since increased allocation to emerging markets and European equities.

‘The supportive global macro environment and the prospect of strong corporate earnings lead us to remain in risk-on mode, with an overweight allocation into equities being the main driver of portfolio performance,’ it said.

‘The Eurozone has been the brightest spot out of the four largest developed economies and growth could well continue to surprise on the upside, whereas the US economy has been expanding at a slower rate than at the end of last year.’

Undeterred by ongoing concerns about the stretched valuations of most asset classes, the group said it is still too early to be cautious.

Markets are not showing any signs of euphoria just yet, which would signal the end of the bull market.

‘For financial markets, this political development has boosted the perception of international investors towards the region and translated into strong demand for European assets, primarily for equities, the common currency and peripheral sovereign debt.’

Turning back towards the European financials sector, the report read: ‘One can also feel more confident towards the state of the banking sector in Europe where solutions to sort out failing banks, particularly in Italy, are being applied.’

EM momentum

There has been a revival in emerging markets, as global growth in the area has been accelerating for the first time in six years, the report pointed out.

The FFG puts this down to the fact that fears over higher interest rates, a stronger dollar and US protectionism have failed to materialise.  

‘Financial conditions are very supportive, as credit and EM debt benefit from healthy fundamentals and benign default rate expectations.’

Alternative picks

The FFG has maintained its allocation towards hedge funds, with an overweight position of 16%.

‘The allocation to alternative strategies has so far proved to be much more rewarding than it was during 2016,’ it said.

The group also holds positions in global macro, volatility arbitrage, CTA, merger & arbitrage and Long/short equities.