CAMRADATA has published a new whitepaper entitled, Global Growth in Global Equities, which examines the outlook for global equities investments and considers why they continue to be the pillar of investors asset allocation and whether this trend will continue.
The whitepaper includes insight from investment managers and pension managers from firms including Artemis, CQS, Mackenzie Investments, Aon, MJ Hudson Allenbridge, Redington and PwC, who attended a recent CAMRADATA Global Equities roundtable.
It highlights that global equities remain the backbone of investment allocation for institutional investors, with over 90% of asset owners invested in global equity strategies, which provide a hunting ground for core holdings across the stock market.
It reports that investors view global equities as being a diversifier or an opportunity to target faster growing regions in order to achieve better returns than they can locally.
Sean Thompson, Managing Director, CAMRADATA said, “As the global equity markets rallied in the first months of 2019, following the shift in October and December last year, investing in equities in general and specifically global equities has presented opportunities. According to Citywire Discovery data, global equities attracted the most money over the timeframe, which resulted in a €11.10 billion inflow into portfolios of Citywire-tracked managers.”
“The big questions for investors now are whether global stocks will continue to provide good opportunities and diversification for investors? What innovation can we expect to see in this sector going forwards, and will there be new considerations and approaches? What effect will the US and China trade tariffs have on the global markets?”
The investors at the roundtable highlighted that searches in private credit, infrastructure and Multi-Asset Credit were taking up more of their time than global equities.
They also considered how some investors are looking at income assets, as well as shifting to passive equities because of cost.
They noted that there is fresh interest in equities from the Wealth channel in the UK, but less so from DB pension schemes.
They also discussed the paradox of liquidity and how long-only equity managers attract attention, flexible and dynamic style approaches to investment strategies, before considering asset value and cashflow value.
The final topic of conversation was Environmental, Social and Governance (ESG) criteria, which all the panel recognised as a growing theme for their clients.
Key takeaway points were:
- Investment searches are becoming more complex, as clients looked not just for one manager but complementing styles.
- Some pension funds are reducing their equity exposure despite equities having served pension funds well and still needing returns. Equities have helped close deficits, but the next logical step is for those funds to move to match or even buy out liabilities
- Quality and Growth did not cede to Value last year or the first half of this year
- If a manager is conscious of the currents captured by style effects and wants to navigate between those currents, determining which metrics to apply as constants in the valuation process is critical
- The report highlights research from the University of Arizona that only a limited number of constituents drive the stock market. In the USA, 50 stocks have made 40% of the value creation over the last 100 years. Ninety-six per cent of companies destroyed value.
- The difficulty with growing themes such as ESG is that universal standards are hard to implement. Thus far, the asset management industry has been guided far more by principles than unambiguous regulation.
Sean Thompson, Managing Director, CAMRADATA concluded, “Our free whitepaper provides a great deal of insight into what the future may hold for this asset class, including the increasing impact ESG factors may have on investment strategies.”