Scientific studies suggest the world is still on track to exceed the 1.5 degrees Celsius increase in temperature relative to pre-industrial times, by 2050. We collectively need to do more - and the power of private capital has a key role to play.
Rich Pickings explores the investment beliefs and philosophies of prominent professional investors. In this episode, I'm in conversation with Andrew Clifford, co-founder, co-CIO and CEO of international equities manager, Platinum Asset Management.
The 17 Sustainable Development Goals (SDGs) are vitally important to building a better world for all humanity. Using an SDG framework reduces portfolio risk while making a positive SDG impact.
The financial services industry has done the impossible and made money boring, opaque and difficult to understand. If we better understand the psychology of money, we can better help our clients.
The mind-set that works so well when people are building their nest egg for retirement can damage their quality of life in retirement. We help clients accumulate responsibly - we can help them decumulate responsibly, too.
Positive ESG selection creates a broader universe of sustainable companies and greater opportunity set than negative or exclusionary policies, delivering more sustainable risk-adjusted returns.
When markets are exuberant, it is difficult to see - let alone act - against the hubris. When markets are down in the dumps, it is difficult to see past the misery. A reductive macro-economic framework may help.
Australian cash rates will stay low for decades. Low interest rates mean high asset prices, which means much lower returns ahead. Our client communications must be in tune with this new environment.
A recent independent study into retirement from the perspectives of over 1,500 older Australians found that financial advisers are the keystone to retirees' well-being.
As investors themselves, investment advisers can suffer from the very biases they attempt to combat within their clients, risking the delivery of optimal client outcomes and deepening relationships.
Investors are concerned about investing in assets with exposure to carbon emissions. However, regulated electric utilities will be a significant beneficiary in a greener world.
In the 1990s and 2000s, investors were largely able to ignore the macro picture. But macro forces have reawakened and matter more than ever for portfolios to succeed in meeting client goals in the years ahead.
Style matters when constructing portfolios, but there are other characteristics in a manager that are as - if not more - important in generating consistent returns over the long term.
Portfolio construction practitioners have access to a broader array of investment research, strategies and tools than ever before - yet obstacles to meeting clients' long-term financial goals are equally numerous.
There is no point in building wealth for the future if that future is one of frequent and catastrophic climate events that undermine our way of life.
In retirement, investors seek to convert their savings into a sustainable salary replacement with access to growing capital. The metric for success must also shift to accommodate these trade-offs.
Total return portfolios can support retiree spending strategies while removing the temptation to increase risk - in the end, producing better outcomes for retirees.
As the Baby Boomer generation continues to transition to retirement and life expectancies rise, portfolio construction practitioners must ensure retirement solutions meet client goals right to the end of their days.
Companies that are solving the world's greatest challenges - environmental or humanitarian – often have near term imperfections that see them starved of capital. A pragmatic approach embraces imperfections and focusses on the potential for positive societal impact.
Uncertainty around the inflation outlook is at an extreme – yet a view on inflation is a critical input to building portfolios capable of achieving client goals out into the future.
Three economists describe and debate three plausible, forward-looking economic and market scenarios that have a reasonable probability of occurring during the next two to three years.
Infrastructure plays a key role in the move towards decarbonisation and net-zero emissions. Government policy support and the unprecedented amount of capital required to achieve these targets should change how you think about investing in infrastructure.
Capital markets will be shaped profoundly as the economy transitions from a depletive economic model to a more sustainable one. Such transitions will inevitably create winners and losers.
Practitioner education focuses heavily on developing technical investment skills, often to the detriment of knowledge and skills that enable better engagement and understanding of the most important aspect of any portfolio – the client!
Our hypothetical Investment Committee considers three relevant economic and market scenarios which have a reasonable probability of occurring, and the asset allocation implications of each.
Investors should consider the real-world impact of their investments and build portfolios aligned with the UN Sustainable Development Goals as a means to building clients' wealth, and improving well-being.
Investors should view long biased, long short equity as a core solution, dedicating a meaningful slice to portfolios, rather than being constrained by traditional equity/debt buckets.
There are now a plethora of funds that aim to account for ESG issues based on different philosophies and processes. Passive screening and divestment approaches are inefficient ways of bringing about real change.
With the individual, business and economic benefits on offer from a more ethical Australia, the business case for change is a sound one. Strengthening ethics is simply a must for a better future.
With several catalysts impacting on the Australian advice landscape, we are seeing a resurgence back to centrally developed investment portfolio construction solutions - but the approach differs to history.
Self-awareness has been hailed as one of the most important meta-skills of the 21st century. In an investment advice context, both advisers and clients benefit from engaging in activities that promote its development.
Our diverse panel debated which of the high-conviction propositions they heard at Markets Summit 2021 resonated most strongly, which they disagreed with most - and the portfolio construction implications.
Often underrepresented in investor portfolios due to concerns around liquidity, private equity investing with a truly hands-on approach allows active investors to maximise their capital growth potential.
Rather than accepting lower returns for liquidity, investors should go back to the drawing board and re-assess their need for daily liquidity.
Fiscal stimulus and the vaccine have fuelled an extraordinary rally in equities - but, ultimately, stocks are at record highs because of extraordinarily low market interest rates. Investors should be wary of inflation, but also of being underweight equities.
The 60/40 balanced portfolio needs to be “stretched” or redesigned, to mitigate the impact of low yields on overall portfolio risk and return. Investors need to make their equity allocation work harder and consider new diversifiers.
With the official cash rate near zero, it's time to head back to the drawing board to find a more consistent source of income. Private debt provides a compelling alternative source of income in a portfolio.
De-carbonisation, company management and ESG scrutiny are diminishing the influence of commodity prices on resources alpha generation. If long term sentiment begins to turn, there is significantly more value to be found in the resources sector.
Covid-accelerated trends - including digitalisation, geopolitical tension and the impact of ESG on the cost of capital - are structural and divergence within equity markets could increase.
Supply chain decision makers must continue to focus on mitigating risk in 2021, not maximising growth. Political risks outbalance opportunities.
The illiquidity premium offers strong value over the cyclical horizon. A combination of interest rate, credit and illiquidity risks provide diversified fixed income exposures with attractive return potential.
During 2020, G-REITs experienced a once in a generation demand shock. With new building supply and REIT balance sheets in good shape, G-REITs are well positioned as economies reopen and demand returns. Now is the time for G-REITs.
Structural factors will ensure that the cash rate cannot rise over the medium term, resulting in negligible cash returns. A core fixed income exposure consisting of Australian government bonds will outperform cash over the long term.
It's time to construct portfolios with investment strategies designed to advance humankind towards a global sustainable economy, a just society, and a better world.
Believe in sustainable investing or not, investors need to understand its impact on investment returns and portfolio construction as capital markets stand on the cusp of a transformation to an ESG world.
Scale-as-a-service cloud computing platforms allow companies - both large and small - to get their IT infrastructure up and running in minutes. Over the next decade, this will have profound implications for the global economy.
The US, Australia and their allies have long depended on global "rules of the game" for their major companies and sectors to flourish. Australia and the US will have to accept that China will play an ever greater role shaping these rules.
The Investment Management Analyst Certificate (IMAC) advances investment management analyst knowledge, skill and expertise in a definitive set of competencies necessary for building and/or advising on quality multi-manager portfolios. It is both a structured post-graduate certificate course in its own right, and the Australian-based Registered Education Program for the global Certified Investment Management Analyst® (CIMA®) program.
The first generation of behavioural finance described people as "irrational", fooled into cognitive and emotional errors that diminish wealth. The second generation of behavioural finance describes people as "normal" - we use shortcuts and sometimes commit errors on the way to satisfying our wants.