Investment Strategy Forum 2020
[i3] Investment Strategy Forum 2019

[i3] Investment Strategy Forum 2019

Investment Strategy Forum 2020

The Pivot

One of the most common images of a dolphin is that of it gracefully jumping out of the water. Unlike the ‘fish out of water’ idiom, this mammal is amphibiously at ease as it pivots in and out of the water.

What’s probably less certain is the reason for this action, with an ongoing debate among scientists.

Some studies attribute this movement to the need to save energy as there’s less friction in the air, or to get a better view of its distant prey. Other explanations propose that as a form of communication or simply playfulness. Yet others hypothesise that dolphins jump in order to clean themselves of parasites!

Peace and Patience

The US Federal Reserve Chairman’s comments in Q4 2018 triggered four tumultuous months of market sell-off in stock and bonds, with ‘peace’ returning only after the Fed signalled patience with future rate hikes and its quantitative tightening program.

Dubbed the ‘Fed pivot’, it clearly illustrates the undue influence of monetary policy over financial markets, and the outlook for equities, bonds and financial assets.

However, Fed-watchers remain divided as to whether this marks the end of rate hikes and hence future easing, or if this is simply a temporary pause, subject to inflation and growth objectives.

Regardless of either scenario panning out, investors are now forced to reckon with the actions of the Fed and other central banks driving the valuation and performance of their assets.

Unintended Consequences

In Australia, the prudential regulator recently issued a performance measurement metrics, dubbed ‘heat map’, assessing the performance and sustainability of superannuation funds. While its intentions are noble and some benefits are clearly present, it inevitably creates another constraint for portfolio management, which may not be market driven.

Adaptability

A dolphin swims by arching its back and flexing it vertically up and down to propel forward. This contrasts with a fish, which sways its body left and right in order to move forward.

In an era of continued distortion of markets, technological disruption and regulatory intervention, do we need to have a fundamental re-calibration of the portfolio moving forward? How can we overcome legacy systems, traditional models and conventional thinking to embrace the new forces at work?

In its 9th annual edition, the [i3] Investment Strategy Forum will challenge the CIO and portfolio strategist to ponder over some of these issues:

  • Does the fund have the governance capability to embrace complexity while incorporating flexibility in decision-making?
  • How integral are macroeconomic analysis and geopolitics, when the central tenet to portfolio construction is usually driven by fundamental valuations?
  • How do you manage your portfolio in a negative interest rate environment?
  • Has the bonds vs equities correlation broken down? Do we need to re-define diversifying strategies?
  • If companies are going ‘private for longer’, is there still sufficient alpha in the public markets?
  • Can business intelligence and technological tools provide the fund with a competitive advantage in the hunt for alpha?
  • As funds increasingly access the unlisted markets, how can an integrated risk budgeting system across public and private markets be implemented? Is there an impending bubble in the unlisted markets?
  • How do you prioritise the multiple ESG objectives such as climate change, modern slavery, shareholder engagement etc, as well as the plethora of SDG initiatives?