Introduction
The macroeconomic events of 2023 have, so far, left no industry free from disruption. In some way, each sector has seen a form of transformation - the investment world included. Disruptive trends are currently reshaping markets due to soaring inflation, significantly higher interest rates and geopolitical tensions. As a result, with the ever-looming threat of recession, investors are unsurprisingly on edge. At the same time, we are in the midst of a technological revolution. The ever-changing regulatory landscape and continued move towards sustainability are yet two more themes that look to change the way we live our lives, but also how clients wish to invest their capital.
However, while this disruption can be daunting, it also presents investors with new opportunities. At this year’s Square Mile Investment Conference, we encouraged delegates to rethink, reimagine and reconnect. We were joined by an incredibly impressive line-up of speakers who shared their thoughts on how to navigate through this new world. In this dedicated conference magazine, our sponsors share further insights, investigating a variety of topics such as the new challenges for financial advisers, how to get protection from volatility and why it’s so important to weed out greenwashing in the investment industry - amongst many other topical themes.
Looking at the market backdrop with a wide-angle lens, Simon Morris from Premier Miton Investors outlines the demographic trends which are changing client needs. He argues that these changing needs necessitate a reaction from the asset management industry to offer investment solutions which answer the growing requirement from clients to draw a consistent income level from their portfolios in retirement. Furthermore, Keith Balmer, at Columbia Threadneedle Investments, explores the new challenges for financial advisers caused by new FCA regulations, geopolitical tensions, and changes in supply chains.
In the fixed income space, Julien Houdain, Head of Credit at Schroders, describes three market scenarios for credit investors over the next 12 months, and the subsequent implications they all have on investors. Sticking with bonds, Harry Richards and Adam Darling at Jupiter Asset Management argue that investors have a once-in-a-generation opportunity to lock in high yields in the investment corporate bond market. They explore the tailwinds that are great news for investment-grade bond investors too.
Turning to the multi-asset space, John Roe and Andrzej Pioch from Legal & General Investment Management answer questions on the benefits of taking on investment risk given that cash currently offers 5% returns and how active asset allocation adds value. On the subject of cash, Paul Seaton from Fulcrum Asset Management takes a deep dive into why, while it may seem beneficial to hold cash in the current environment, there are dangers in seeing it as a ‘risk-free’ option.
Elsewhere, Jamie Irvine at abrdn, explains how the threat of near-term recession could present opportunities in certain sectors and why being highly selective when it comes to sector and issuer concentrations in portfolios is essential for protection against volatility. At AXA Investment Managers, Nicolas Trindade further explores why short-dated fixed-income securities could be a way for investors to enhance cash returns, through active management to minimise volatility risk too.
Andrew Kellier at Baillie Gifford also argues why active management can make all the difference though this time in emerging markets, while Charles de Quinsonas at M&G Investments details the latest goings on in Latin American politics, with a particular focus on the upcoming Argentinian election in October. He also examines the political disruption in many African countries over the last five years and how political disruption is likely to continue throughout the continent. Finally, Omar Negyal at J.P. Morgan Asset Management identifies why a company’s dividend policy is directly linked to the quality of its governance, particularly in emerging markets.
With responsible investing continuing to pique interest, many of our speakers explore the different ways this approach affects investments. Hakan Kaya at Neuberger Berman kicks discussions off by highlighting copper as a cornerstone of the green-technology revolution and how a likely supply-demand imbalance could increase the metal’s market price. Paul Flood from Newton Investment Management, part of the BNY Mellon family, explores how the transitions changing our legacy energy framework are vital and stresses the importance of being part of the solution to climate impact. At Wellington Management, Paul Skinner suggests that impact investors can help society by focusing on companies aiming to narrow the digital divide between high-income countries and lower-income nations.
With the AI theme dominating headlines in 2023, Aviva Investors’ Richard Saldanha explains why global income investors shouldn’t ignore less fashionable sectors, such as healthcare and consumer staples, where companies that have managed to survive the recent economic difficulties could provide interesting investment opportunities. Conversely, at EdenTree, David Katimbo-Mugwanya explores the new world of blue bonds. He identifies why the emergence of these outcome-linked bonds is a crucial innovation within this space. Finally, George Latham, Managing Partner at WHEB, argues how radical transparency is essential to eradicate greenwashing from the world of sustainable finance.
Ultimately, while the short term looks set to continue on a volatile course, there are still many opportunities to be had for investors. The pace of innovation creating those opportunities, coupled with increased regulation, could appear imposing at first. However, by staying active in the markets as our sponsors have suggested, navigating present and future challenges is possible.
