Brace for more market volatility in 2023, and orient portfolios to resilient fixed income and equity securities, and hedge fund and infrastructure managers.
2022 has been a horrible year for investors. Usually when markets are down 20%, you might feel that the worst of the pain has passed. That's unequivocally wrong. The most dangerous phase of markets is yet to come.
Inflation will not fall back to the pre-Covid 2% level that the US Federal Reserve wants. Two underlying structural changes will keep US inflation at about 4% in the future.
Rich Pickings explores the investment beliefs and philosophies of prominent professional investors. In this episode, I'm in conversation with Alex Lennard, Investment Director, Ruffer in London...
The latest national census reveals that Australia is a nation determined to change direction. This will re-shape Australia's economic and cultural landscape and influence the way that practitioners build multi-asset portfolios capable of meeting the long-term financial goals of Australians.
As a new age of economic localisation reunites place and prosperity, practitioners must understand the implications for economies and societies - and for portfolio construction.
With geopolitical tensions on the rise, portfolio construction practitioners need a framework for making sense of the cacophony of geopolitical risks with the eye towards generating investment-relevant insights.
Post Covid, the inflation equation has changed between the East and the West. Diverging monetary policy settings and subsequent future economic growth favour the East in a world where the future ain't what it used to be.
The future ain't what it used to be – that's just noise. Listed Global REITs provide investors with a competitive return profile and diversification from equities, a compelling reason for allocations in portfolios.
The future ain't what it used to be, so capital allocators should look beyond arbitrary benchmarks and combine a thematic universe with the structural benefits of small cap investing.
Practitioners must remain open-minded and continuously challenge their portfolio construction beliefs, techniques and tools. This session addressed three contemporary portfolio construction issues: We must use a risk-based framework for portfolio design; The value rotation has just begun; and, ESG ratings undervalue climate solutions…
The case for investment-grade corporate bonds replacing traditional sovereigns as a core allocation is strengthening with the income opportunity of this sub-asset class being the brightest it's been in years.
The regime has changed. We know from experience that diversified portfolios are robust in a disinflationary world. But some portfolios may not be so robust in an inflationary world. The future is definitely not what it used to be.
If the question is how to achieve an attractive risk-adjusted return through all economic environments, then private debt is the answer. The future ain’t what it used to be - except for private debt.
There is increasing traction for the idea that, to succeed in today's complex, uncertain world of investing, practitioners must embrace alternative investment strategies. But are they all they're made out to be?
Investors began 2022 in bullish form however rising inflation concerns combined with Russia's invasion of Ukraine soon soured the mood. More than ever, practitioners need to understand the key secular and structural forces impacting on markets and the portfolio construction implications.
In stage two of our hypothetical Investment Committee meeting, three economists describe and debate three plausible, forward-looking economic and market scenarios that have a reasonable probability of occurring during the next two to three years.
The seismic shift in economic, social and political themes means the future ain't what it used to be – rendering the 60/40 portfolio inadequate.
Investing and engaging for change, committing to tackling the climate-related risks that threaten the future of the planet is our duty or our future ain't what it used to be!
Private equity as an asset class is one of the longest-term strategies. Setting up a solid top-down framework is key to successful private equity portfolio construction.
In this third step of our hypothetical Investment Committee meeting, a diverse panel of asset class experts debates the implications of the three economic scenarios outlined in the Economic Scenarios Roundtable for medium-term (three years) asset class returns.
Our asset allocation consultants explain the asset allocation implications of the three Economic Scenarios and blended portfolio, and debate how best to implement the portfolio.
Infrastructure's unique inflation hedge characteristics protect companies and investors while allowing a tailwind of asset base growth to drive long-term total returns.
Decarbonisation of the economy is the most important thematic of the next 30 years. The future ain't what it used to be! Investors can achieve net-zero portfolios without compromising returns or increasing risk by using "green shorts".
Sustainable investing is booming - and sustainable investors need to align their strategies with sustainable development ambitions. The Sustainable Development Goals provide a valuable blueprint.
Portfolio construction requires precarious navigation in an ever-changing world. Only when we adapt our skillsets and reframe our perspectives can we understand why things are happening and capture upcoming opportunities.
A whole-brain approach to portfolio construction requires a combination of knowledge, skill and expertise across the technical, analytical "fundamental" topics AND the human factors is essential for better quality portfolios.
The theory of cognitive dissonance was proposed in the 1930s by psychologist Leon Festinger. Understanding how cognitive dissonance can bias our investment decision making, and recognising when our behaviour is being driven by it, is vital.
As policymakers begin to craft a new Bretton Woods, and seek to embed the values that liberal democracies want to uphold, practitioners must understand the implications for portfolios.
The next 10 years are likely to be dramatically different than the last 10 years, and investors will need allocations to alternative investments in this challenging environment.
Prolonged exposure to high volatility causes investors to subsequently underestimate volatility (and vice versa), leading to predictability in stock returns - and the ability to construct a trading strategy that exploits the effect.
We must take a multi-factor approach to analysing funds – including ESG, Quality, Size, amongst others – to ensure portfolios reflect the investor's longer-term philosophy and/or shorter term views.
Since I addressed Markets Summit 2022 back on 23 February, arguing "The days of abnormal monetary policy are over", Russia's invasion of Ukraine has triggered a food and energy crisis while declining consumer sentiment and Chinese lockdowns provide headwinds to growth.
Since I addressed Markets Summit 2022 back on 23 February, arguing it was time for a new investing playbook, there has been a major repricing in financial assets. The adjustment has further to run.
With stock market valuations close to record highs, and interest rates beginning to rise from all-time lows, traditional portfolios are likely to disappoint in the years ahead.
Real US Treasury yields collapsed from 7% to -6% between 1981 and 2021, yet most people fail to understand why. Understanding changes in real rates is crucial to forecasting nominal interest rates, and the outlook for asset prices.
Rich Pickings explores the investment beliefs and philosophies of prominent professional investors. In this episode, I'm in conversation with Hari Balkrishna, Portfolio Manager - Global Impact Equity Strategy, T. Rowe Price.
In 2022, emerging markets are poised to outperform the developed world, as Western policymakers tighten monetary policy and withdraw fiscal stimulus. Portfolios should be reallocated to those parts of the world that are beneficiaries of this macroeconomic backdrop.
With US inflation at a 40-year high, and the housing and labour markets red hot, the US Fed has finally taken a distinct and meaningful step forward on the path back to normal. Investors need to accept that the days of abnormal monetary policy are over.
Is there such a thing as normal? Steady states are becoming increasingly rare, the belief in 'reversion to the mean' is less relevant than ever and, ultimately, investors are better placed focusing long-term change.
Investing over the next several years is going to be unlike anything we've experienced in decades. It's time to go back to the drawing board to reassess the best approach to both defence and offence in a more volatile, changing market.
Unlike the annexation of Crimea in 2014, the 2022 Russia-Ukraine crisis is occurring in an inflationary macro context. As in 2014, increasing exposures to wheat and gold to hedge against the risk of higher inflation is a strategy that should perform strongly.
As we shift to a bipolar or tripolar world, in which the US and China decouple more rapidly, and Europe lives somewhere in the middle, we must seek to understand the implications for asset classes, sectors and geographies.
Investors shouldn't overlook the potential benefits of focusing on companies in the energy sector. It looks like what's "old" will be “new” again.
Over the long-term, dividend growth and dividend yield are the dominant sources of long-term return. Valuation's importance recedes over time. Sustainable dividend growth companies appear to play defence well.
In a world of rising yields, fixed income investors must know that what's worked in the past might not work going forward. A braver and broader approach is required, by going on the offensive in fixed income.
All the indicia of a colossal equities bubble are in place. But there is a lot to own for the next five years if you are prepared to go where the crowd is thinnest, allowing you to be on offense as you defend your clients' portfolios.
Investors may be facing a regime shift in markets that changes the traditional relationship between growth and defensive allocations. In a low conviction world, an allocation to a blend of public and private credit makes sense.
Global microcaps offer investors an unparalleled opportunity to invest in economic or market recoveries. Global microcaps' asymmetry around large market events provides investors with a powerful offence that is a great portfolio defence.
The game has changed - the 2010s is the wrong analogue for the 2020s. DIG in for an important era, when stakeholder capitalism displaces shareholder capitalism and becomes the main route to boosting shareholder value.
The next decade of decarbonisation is the decade of opportunity to de-risk portfolios and identify green investments. Climate change risk factors are changing asset valuations. Key to success is the need for portfolios to account for climate change risk or risk being obsolete.
Rising interest rates will create casualties and collateral damage in asset prices, but will bring back market discipline, requiring a rethink of what "defensive" even means.
In achieving longer term objectives, climate change demands both a defensive strategy to mitigate longer term risks and an offensive, tactical, approach to capitalising on opportunities.
A great attack scores points, but defence wins premierships. The same principal applies to investment portfolios. By making private debt the centre of a defensive strategy, investors can win in all conditions.
Inflection points in inflation, interest rates and the large-scale monetary distortion of recent decades suggest the future will not repeat the same playbook as recent decades.
A new market regime demands a change to the art of portfolio construction. The return of inflation volatility represents the most challenging and significant paradigm shift in decades.
Many expect that the end of the pandemic, reopening of economies, tight labour markets and excess consumer savings will push markets higher. Proceed with caution, the best offence is a great defence.
Record low interest rates have fundamentally changed the playbook for income investors. With banks withdrawing from the CRE debt market, other lenders have greater opportunity.
Although traditional barriers to participation in PE are fading, PE remains on the bench for many individual investors. With an end to easy value creation and challenging conditions ahead, don't miss out on PE outperformance in 2022.
Our diverse panel of experts debated which of the high conviction propositions they heard during Markets Summit 2022 resonated most strongly, and which they disagreed with most - and the portfolio construction implications.
Our Markets Summit program kicks off with a video retrospective of the key events of the prior year...
As governments become accustomed to spending vast sums of money and workers regain their bargaining power, the short-term inflationary pressures attributed to Covid-19 will bleed into a longer period of higher inflation.
Fiscal stimulus will help boost US growth to its strongest levels in decades in 2022 and European economies are poised to rebound. However, inflationary pressures will persist. Portfolios will need assets that provide downside protection, as well as strategies to capitalise on the growth ahead.