The divergence of investment regimes, monetary policies and markets will have profound impact on the drivers of portfolio construction. As the printing press at the US Federal Reserve decelerates, central banks in Europe and Japan continue to up the ante on monetary stimulus. Consequently, elevated asset valuations may indicate that we are borrowing investment returns from the future. Where will growth come from next?
The search for yield, taking into consideration correlation, valuation and volatility, may need to be re-examined in greater granularity. No longer are broad-brush definitions of markets, eg developed or emerging markets, meaningful. Questions also abound as to the viability of bonds as effective diversifiers to equities, due to the low yield environment.
Short-termism and instability of local politics, including the rise of the far-right, threaten the social fabric of the developed world. Geopolitical tensions, hitherto simmering on the periphery, may start to affect markets too. How compelling are these risk factors to the portfolio?
Perhaps it is during these daunting times that the long term investor stands differentiated.
- What does long-term investing mean in a volatile, irrational and uncertain environment where payoffs are hard to forecast?
- Does asset allocation still work? In the search for alpha, should investors look to individual manager/security selection rather than broad market beta exposures as their main return generator?
- While there is a greater appetite for alternatives and unlisted assets, how can investors manage the fee and illiquidity constraints?
- How should investors position their portfolios in the face of downside systemic risks, but cyclical upside opportunities? Is the risk mitigation system sufficiently robust to support the deployment of tactical and opportunistic approaches?
Celebrating its fifth anniversary, the [i3] Investment Strategy Forum 2016 continues to provide an educational environment for Chief Investment Officers, Strategists and Senior Portfolio Managers to engage, debate and exchange perspectives on portfolio strategy and construction.
To see the photo gallery of this program, please click here.