Investment horizons: issue 7
Welcome to the seventh edition of Investment Horizons, our regular look at the vital themes for institutional investors.
What does the “Rise of the Robots” mean for asset prices?
Robotics has moved from science fiction to industrial reality, leading pessimists to paint a bleak picture of social dislocation. We are optimistic that, if handled well, automation will create neither widespread joblessness nor rampant inequality. However, investors will need a roadmap of its effects on inflation, growth, interest rates and asset prices if they are to remain ahead of the game.
Churn is not necessarily burn: debunking the myths of portfolio turnover
Our research challenges the assumption that high portfolio turnover results in poorer performance. We found no evidence of any general relationship between turnover and returns among active equity portfolios, apart from emerging market funds. What our analysis did show was that picking the right active manager is more important than ever among funds that trade frequently.
Emerging market assets: zoom out and refocus
Emerging markets are a big part of global markets, yet are typically under-represented in investors’ portfolios. Many are now asking how they should build a strategic allocation. We argue that investors need to be selective. Emerging market equities and local debt are two areas well placed to outperform other EM assets handsomely over the medium term. Their outlook also compares favourably with developed market assets.
Why investors need a multi-layered approach to risk
Equity risk management has had to adapt to roller-coaster markets, new demands from clients and regulators and advances in technology. These pressures have highlighted the limitations of traditional risk measures, prompting a search for new approaches. We argue that investors now need a multi-layered approach as they build portfolios.
Primer: constructing a case for infrastructure finance
Infrastructure covers a wide variety of assets, from airports and telecommunications networks to hospitals and schools. Their unifying characteristic is often stable operating cash flows, which appeal to equity investors while providing comfort to lenders. There are many routes in to the market, offering a wide variation in risk and return, but in all cases, expertise is required to steer a clear path.