AI has been described as important a lever for detaching economic growth from population growth as the steam engine. Companies that don't use AI to remake their business simply don't have a place in today's portfolios.
Today, as practitioners continue to navigate the structural shift to an inflationary, higher interest rate investment regime in a volatile, uncertain, complex and ambiguous world, it stands to reason that portfolio strategies must continue to evolve from what worked in the prior “lower for longer” regime. We must think through which portfolio construction strategies remain fit for purpose, which are no longer appropriate, and which new strategies should be adopted. But common wisdom also warns us against throwing the baby out with the bathwater. Prioritising the most important changes to make to investment objectives, asset allocation, currency management, manager selection and blending, and risk management is key – because you can do anything, just not everything!
We are at a critical turning point in human history as developments in the field of artificial intelligence revolutionise the ways in which people work, learn and play – to the same extent that the printing press, steam engines, electrification, telephones, television, computing and the internet changed the world. While the integration of AI promises radical productivity improvements across a range of activities, concerns are growing that such technologies will exacerbate social inequality, the spread of misinformation, and financial volatility, to name just a few. And then there is the “known unknown” risk of so-called singularity in which AI surpasses human intelligence.
Some 20 years ago, the Forum stood out from the crowd by arguing that the “Turbo of Technology” was one of five megatrends that would shape portfolio construction for decades to come. It’s hard to remember, but Google was just a baby! But it seems we ain’t seen nothing yet. Not only has the Turbo of Technology arrived, a ludicrous exponential curve is upon us. Technology is more than one of five Megatrends – it is THE megatrend! Investment fund managers, service providers and practitioners must understand the risks and opportunities associated with the unfolding evolution of technology and AI, and take specific action relevant to multi-asset, multi-manager investment portfolio construction. Doing nothing is not an option!
We are living in the middle of a major societal shift towards not just the use of, but the reliance, dependence and advancement of our lives being built on technology that seeks to emulate us, mimic us and envelope us.
Three gigantic, global, interconnected risks have the potential to upend the world as we know it. Investors who understand these will be better positioned to successfully navigate the uncertainty plaguing our world.
In the same way that Moneyball has swept every professional sport, data science is bringing greater transparency to portfolio managers' decision-making skill. To select managers capable of outperforming, behavioural analysis is crucial.
At a time when "you can do anything", there are meaningful implications and opportunities for portfolio rebalancing and investors still structurally underweight bonds need to put aside recency bias and "do something" - now.
Yield premium over comparable liquid markets, control, upfront economics and low historical volatility and default rates make private credit an asset class to consider for a core allocation in investors' portfolios.
As markets become narrow and expensive, core, growth and quality portfolios are converging. This presents risks for many portfolios but a great opportunity for valuation-focused investors.
Every day, every one of us is touched by infrastructure and, the longer we live, the more billions of us there are, and the more we need infrastructure. Demand for essential infrastructure offers opportunities for investors.
Opinions about private markets are often not rooted in facts, due in part to the fact that data on private markets has been scarce. But data is available and it debunks some of the common misconceptions about private markets.
The unique characteristics of private debt make it ideal for any portfolio, fitting in either the defensive or growth component of a portfolio – or even both at the same time.
Brokers hire a great many analysts to write and publish detailed analysis on corporate earnings forecasts. It's right to focus on earnings, but the level of delivered growth is less important than the surprise in growth (positive or negative).
The transition a net zero emission economy offers risks and opportunities for investors. Infrastructure is a simple way to benefit from the transition to a net zero emission economy and represents a multi-decade growth opportunity.
Today, many of the leading companies servicing emerging market economies have superior earnings growth to developed market peers, with many trading even cheaper than at the height of the Covid market turmoil.
The primary criticism directed at those who think about the future is that it's an act of futility. But thinking about how the future may unfold has proven to be a useful way to make decisions amidst radical uncertainty.
Investment-grade corporate bonds can improve portfolio risk-adjusted returns. A focus on the highest quality global corporate bonds will provide opportunities for investors to capture future income, as well as add a defensive anchor within portfolios.
Private Equity pooled returns have been attractive while also less volatile than investing in a single fund or fund-of-funds. Enabling investors to "buy the private market" would complement portfolios just like in public markets.
Small Caps have underperformed large cap peers in recent times however cyclical factors today and a rebound in domestic risk sets up for the reemergence in Australian Smalls.