Farming out sustainable investing to passive or low cost options isn’t “for the faint of heart”. In a new world where the winners aren’t as obvious, active management should thrive.
Private market managers aren’t entirely insulated against falls in the public markets, which have resulted in diminished fundraising activity. But private assets aren’t going to stop outperforming anytime soon.
Political polarization in the United States and new regulations affecting the labelling of products and funds means boutique ESG managers are back in the spotlight.
Super funds are a perfect fit for nation-building infrastructure projects, as long as the government doesn’t compete against them. And it shouldn’t be drawn into competing with the US Inflation Reduction Act when the opportunity set is broader than it seems.
Institutional investors using private equity for diversification are just “doubling up on their main bet”, according to Capital Fund Management, and true diversification will only come through strategies that have fallen out of favour in the last decade.
Active managers have been “getting it in the teeth” since the GFC, but that’s about to change as the massive misallocation of capital unwinds. The most valuable companies in the world are trading at a multiple that doesn’t befit their status.
There’s fairly wide disagreement about what private market outperformance will look like in the future, and investors are sweating the amount of money pouring into the asset class. At least the question of valuation is less frenzied than six months ago.
There’s “ammunition for both sides” of the active/passive debate in research that shows just 2.39 per cent of stocks outperform Treasury Bills. But active managers will be buoyed by findings that fundamentals probably do matter.
Investors say they want to build resilient portfolios but all they’re doing is making them robust. And that’s not enough to come back better from a downturn.
Traditional portfolio construction might be dead. But that doesn’t mean there’s no way to beat inflation, even as investors anticipate it will continue to rise and fall over the next decade.
