17th March 2025 – European investors are making strategic shifts in portfolio allocations in response to evolving macroeconomic and geopolitical factors, according to the inaugural Portfolio Panorama report from Janus Henderson’s Portfolio Construction and Strategy (PCS) team.
The data highlights that European investors are increasing exposure to small-cap equities while strategically shifting towards different fixed income asset classes, reflecting a balance between seeking new growth opportunities and preserving stability in an uncertain macroeconomic environment driven by geopolitical realignment, tariff threats, and diverging central bank policies. Meanwhile, developments in artificial intelligence are adding uncertainty, prompting investors to reassess their portfolios and look for the next big growth areas.
The Portfolio Panorama report analyses trends across 140 client portfolios that were added to Janus Henderson Edge™ in March to December 2024 and in January and February 2025 across Europe Ex-UK countries (i.e. France, Spain, Germany, Italy, Belgium, Luxembourg, Switzerland, Netherlands, Malta, Austria, Portugal). The report focuses on aggregated data from European (excluding UK) portfolios over two distinct six-month intervals: the ‘Previous Period’ (March-August 2024) and the ‘Current Period’ (September 2024-February 2025).
Equities: Strong home bias as European investors remain overweight vs. global equity market caps
European clients kept the so-called “home bias” to European equities and remained overweight in domestic equities vs. global equity market caps, with technology continuing to lead sector preferences, followed by Industrials and Healthcare. Large-cap stocks still represent the majority of equity holdings, and their share has increased from 66% to 68% over the ‘Previous’ and ‘Current’ periods, with allocations to small-caps increasing and mid-cap stocks dipping. Small-cap exposure rose from 9% to 12%, while mid-caps decreased from 25% to 20%. Although mid-cap allocations declined, they remain well above the global equities index.
Fixed income: European investors made a strategic pivot towards different fixed income asset classes, as a way to secure yields as the tide shifted and rate-cutting by central banks introduced a new layer of uncertainty to cash returns.
European clients shifted their focus from preservation strategies (i.e. money markets & cash), towards defensive fixed-income assets, including government and high-quality corporate bonds. Average duration in European portfolios increased slightly as central banks cut rates – from 1.65 to 1.70 years over the “Previous” and “Current” periods.
Allocations to government bonds increased slightly from 31% to 32% and corporate bonds from 40% to 45% over the “Previous” and “Current” periods. The proportion allocated to defensive strategies rose significantly from 36% to 59% over the ‘Previous’ and ‘Current’ periods. Aligning with the transition out of preservation goals-based strategies, funds shifted out of cash and money markets into government bonds, corporate bonds and securitised. This shift reflects a preference for stability amid ongoing macroeconomic uncertainty, as investors position themselves for potential central bank rate cuts.
Alternatives and Implementation: European investors scaled back allocations to liquid alternatives amid a sustained equity bull run in 2023 and 2024.
Amid a sustained equity bull run in 2023 and 2024, clients have scaled back on liquid alternative investments. Allocations declined over the past 6 months, from 2.8% to 1.1.% over the “previous” and “current” periods. Long-short equity strategies, which emerged as the favoured approach in the previous period, fell markedly, down to close to zero in the current period, while exposure was increased in uncategorised alternative funds.
Average portfolio fees have fallen, mirroring a rise in passive or index funds known for their lower costs. Portfolio allocation to passive or index funds rose from 11% to 26% over the ‘Previous’ and ‘Current’ periods. Portfolio expense ratios declined considerably from 96 to 51 basis points over the ‘Previous’ and ‘Current’ periods.
Matthew Bullock, Head of Portfolio Construction and Strategy, EMEA & APAC, at Janus Henderson, said: “The findings from our inaugural Portfolio Panorama report highlight the careful approach European investors are taking in today’s market environment. The increased focus on small-cap equities suggests a search for new growth opportunities, while steady allocations to fixed income reflect a continued emphasis on stability. It will be interesting to see how investors act over the next few months and whether the decline in liquid alternatives and long-short equity strategies is continuous or a short-term trend. As global market dynamics evolve, understanding these portfolio shifts will be key for long-term investors.”
ENDS
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Notes to editors
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As of December 31, 2024, Janus Henderson had approximately US$379 billion in assets under management, more than 2,000 employees, and offices in 25 cities worldwide. The firm helps millions of people globally invest in a brighter future together. Headquartered in London, Janus Henderson is listed on the NYSE.
Portfolio Panorama report methodology
The information in this report originates from client portfolios uploaded into our proprietary analytical system, Janus Henderson Edge™ from March 2024 to February 2025. Underlying data is solely derived from Morningstar and from Janus Henderson internal sources. For this report we use 140 portfolios that were added to Janus Henderson Edge™ in March to December 2024, and in January and February 2025 across Europe ex-U.K. countries (i.e., France, Spain, Germany, Italy, Belgium, Luxembourg, Switzerland, Netherlands, Malta, Austria, Portugal).
Source: Janus Henderson Group plc
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