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Global equity markets fell across the board in 2018, contributing to roughly two-thirds of the losses investors saw in their portfolios during the year, according to the annual Global Portfolio Barometer published by Natixis’ Portfolio Research and Consulting Group.

“Volatility returned in 2018 and portfolio risk levels were substantially higher. At the same time, signs of an end to the long bull market began to materialize,” Marina Gross, executive vice president of Natixis’ Portfolio Research and Consulting Group, said in a statement. “In a complete reversal of fortune, moderate-risk portfolios that saw double-digit gains aided by overweight allocations to equities in 2017 suffered grave losses due to overexposure to the same asset class in 2018.”

Natixis Investment Managers’ annual Global Portfolio Barometer offers insights into model portfolios and asset allocation decisions from across the world.

The report reviews a global sample of 421 “moderate risk” or “balanced” model portfolios from seven different locations: France, Germany, Italy, Latin America, Spain, the United Kingdom and the United States. The data excluding Spain covers portfolios analyzed by the Portfolio Research & Consulting Group in the six months ending December 2018. Spanish portfolio data is derived from VDOS data.

Natixis found significant differences in asset allocations among moderate-risk model portfolios in different countries, meaning investors with similar risk tolerances might get completely different portfolios and risk exposure depending on where they live.

For example, according to Natixis, moderate-risk portfolios in the U.K. and U.S. were most bullish, with equity weights in portfolios over 50%, whereas Italians allocated just 23% to equities.

In addition, in Italy and Latin America, around 40% of moderate portfolios were allocated to fixed income, compared with 20% in the U.K. and France. According to the Natixis analysis, the different ways regional advisors assigned their equity allocation was just as important as the performance of individual equity markets.

Here are the global portfolio trends that Natixis discovered in its analysis.

United States 

Broad allocations changed little from the end of 2017, Natixis found. In equities, advisors increased exposure to U.S. large caps, and reduced exposure to international developed. Alternatives remained in line with 2017 weights except for a shift from managed futures to option writing strategies.

France

French advisors have reduced their allocation to multi-asset flexible funds on the back of poor performance throughout 2018, according to Natixis. Advisors have since been looking for true diversification away from traditional fixed income and equities, turning to absolute return fixed income strategies.

United Kingdom

According to Natixis, the only allocation change in the U.K. was a small reallocation from multi-strategy alternatives to other asset classes. “Perhaps [advisors] here are waiting for clarity on the tortuous Brexit process before deciding on any changes,” the report notes.

Italy

Natixis found there was a large shift back into fixed income, in particular to European fixed income, while investors reduced positions in multi-asset funds. Italian government bonds also appeared in portfolios once again, according to Natixis.

Latin America

Investors’ aversion to equity risk was stronger than their fear of rising rates as there was an overall shift from equity to fixed income — specifically global, emerging market and U.S. fixed income categories. In their equity allocation, advisors shifted from global equity to direct U.S. equity exposure where growth is still being favored over value.

Germany

With the anticipated end of quantitative easing in Germany, investors are considering shifting the fixed income mix in their portfolios, by increasing allocations to emerging markets or high-yield, according to Natixis. The report also notes that alternative strategies saw strong demand in 2018, especially absolute return bond funds to generate return in a low-rate environment. Exposure to alternatives is now close to that of multi-asset funds, according to the report.

Spain

In moderate portfolios, the main change Spanish advisors made in 2018 was a decrease in higher risk fixed income and conservative multi-asset funds. ”In general, concerns about higher risk fixed income have clearly increased, especially for the lower-rated corporate credit,” the report notes.