Please find below a summary of the IMAP PD day from our Investment Specialist, David McDonald, CFA.
After an economic overview provided by BT, the first session of the day tackled the issue of benchmarking for managed accounts and what is an appropriate performance measure. The panellists discussed why CPI+ and peer group measures might not be good benchmarks as they are not investable and not knowable in advance. Contrasting this though was the view that clients look at peer performance and inflation when judging the performance of their managed account.
A panel session on illiquid assets highlighted the illiquidity premium available and the benefit of low correlation with other assets. While access has been difficult for retail clients, there are more private market funds bringing offers to market now that can be accessed and that offer better liquidity.
The following sessions considered the impact of high inflation on portfolios and whether opportunities remain in growth assets. The overall view was a cautiously positive one with most speakers believing that inflation is slowly coming down and is likely to continue on that path even if it might remain above the RBA target for an extended period. There was an optimistic view on growth assets with opportunities seen still in small cap equities which have lagged big caps and also sectors such as emerging markets and some credit sectors.
The follow up to this considered the likelihood of recession and how to position the defensive part of a portfolio. The panellists were in agreement that Australia is unlikely to suffer a recession and that now even the USA is seen as muddling through with low growth but no recession. The outlook for European economies is probably less positive. In terms of portfolios, now that bonds are yielding over 4%, this was seen as an asset that once again offers value for portfolios and is again back to a level where they can offer genuine defensive qualities.
The final session of the day covered a very interesting topic and one that is getting much attention – the impact of moves towards net zero on portfolios. It was noted that clients are becoming more aware of ESG factors and asking questions about where their money is being invested. Beyond the “what to avoid” though the panel looked at what investment opportunities could evolve from this. Alternative energy, battery technology and minerals, “green” buildings and infrastructure – there is a growing area that could deliver positive value to a portfolio as well as delivering ESG credentials.
Thanks and regards,
Jenny
Jenny Phimleut
Program Director
Institute of Managed Account Professionals Ltd