US assets more attractive than Europe and China, says multi-index manager

US assets look more attractive as China and Europe grapple with lingering issues that are hampering their economies.

That’s the view of Citywire+ rated Andrzej Pioch, who manages LGIM’s multi-index fund lineup, which invests in index funds across various asset classes and regions.

Pioch said that despite a recent rise in Chinese stocks, LGIM worried about the country’s “growth potential” as it faces a trio of large-scale challenges.

“The first problem is that the real estate sector seems to be stagnating. Evergrande was supposed to release a preliminary rebuilding plan by the end of July, and they missed that deadline.

“Then they still have their zero Covid-19 policy as they try to tackle a virus five times more infectious than the original,” he added.

“The third problem concerns technology. Tech companies are favorites in the US stock index, but they face much greater regulatory pressures in China. Based on these three metrics, we wouldn’t really be keen on increasing our Chinese exposure now.

Pioch said LGIM is also moving away from European equity allocation to favor US stocks instead.

“As far as wage growth is concerned, it is much higher in the United States than in Europe. This means that the pressure on real incomes in Europe is much greater as they face high inflation,” he said.

“Then there is also the energy crisis in Europe, which is ultimately like an additional tax on the European economy. We have increased our probability of recession for Europe and therefore we want to reduce our exposure there. We took some of our exposure to European equities and transferred it to the United States.

Pioch said an advantage of the LGIM multi-index strategy, which offers a range of funds at different levels of risk, was its broad investment profile across different regions and assets, especially as traditional portfolio allocation 60-40 between stocks and bonds fell. in disgrace.

“People were asking about diversification earlier this year. And that was largely because new data showed that the correlation between stocks and bonds was suddenly higher,” he said.

“Given the degree of uncertainty we are currently facing, it makes sense to spread risk rather than bet on a single region or a single country or a single asset class.”

Pioch said the bursting of the global economy in different directions could actually be seen as a positive in terms of creating a balanced portfolio.

“Different parts of the world are at such different stages and that’s actually good news for diversification. If you look at the US, China and Europe, you don’t see them all moving in tandem or facing similar risk factors.



Mary I. Bruner