05
November 2021
Welcome to the latest edition of the Angles & Perspectives
Anet Ahern
Asset Management
The investment landscape has changed dramatically since the beginning of the Covid-19 pandemic. We believe markets have reached an inflection point, with deep consequences for how we construct portfolios going forward. In this edition, our panel of experts debate a range of issues centred around this topic. Long and short duration assets can be expected to yield very different outcomes than over the past 40 years, which will be problematic for investors and portfolio constructors who cling to what has worked in the past. This challenge is likely to be especially pronounced for fixed income investors, who will need to reconsider their investment toolkit to ensure they are well positioned to continue meeting their objectives.
Angles & Perspectives Q3 2021
The investment landscape has changed dramatically since the beginning of the Covid-19 pandemic. We believe markets have reached an inflection point, with deep consequences for how we construct portfolios going forward. In this edition, our panel of experts debate a range of issues centred around this topic. Long and short duration assets can be expected to yield very different outcomes than over the past 40 years, which will be problematic for investors and portfolio constructors who cling to what has worked in the past. This challenge is likely to be especially pronounced for fixed income investors, who will need to reconsider their investment toolkit to ensure they are well positioned to continue meeting their objectives.
Welcome to the latest edition of the Angles & Perspectives
Introduction
Anet Ahern
CEO, PSG Asset Management
Thriving in a major market inflection depends on duration and mandate
Kevin Cousins – Head of Research
Major market inflection points:
Thinking about portfolios for the next decade
Lyle Sankar – Fund Manager
Multi-asset fixed income funds:
Risk management when the rules are the same, but the game has changed
Ané Craig - Analyst
Portfolio holdings as at 30 September 2021
Click here to view the portfolio holdings of the funds to 30 September 2021
Performance to 30 September 2021
Click here to view the performance of the funds to 30 September 2021
Unit trust summary
Click here to view a summary of the unit trusts
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Introduction - Angles & Perspectives Q3 2021
We have been writing about the phenomenon of built-in extremes within the same system – in this case the market – for some time. The discerning investor seldom sees the market as one entity and realises that from time to time, bifurcations may occur. This fragmentation into quite distinct parts can occur slowly at first, initially creeping into the system almost unnoticed, but eventually manifesting itself in stark and undeniable ways. This offers both risk and tremendous opportunity.
Read moreThriving in a major market inflection depends on duration and mandate - Angles & Perspectives
Why is the bifurcation between long duration and short duration assets important now? Long duration assets have earned their high weightings in benchmarks and dominant positions in investor portfolios through many years of delivering good returns. However, after 40 years of declining interest rates and inflation, the world appears to be at a long-term inflection point. Anchoring on what has worked historically through big market inflection points, is immensely risky for investors. The ratings of long duration assets, as highlighted below, imply a continuation of the current cycle for many years into the future. Should that outlook be incorrect, very substantial capital losses may ensue.
Read moreMajor market inflection points: Thinking about portfolios for the next decade - Angles & Perspectives
Conditions have changed substantially over the past 18 months, and we believe the weight of the evidence suggests that the market has probably reached an inflection point. In our view, the probability has shifted towards a more reflationary global backdrop, which the market is not yet pricing in. This is likely to have wide implications when considering asset classes that performed well over the last decade, and those that can be expected to deliver real returns at appropriate levels of risk over the next decade. Accordingly, fixed income investors need to review their strategy and explore the benefits of multi-asset income funds for generating real returns at low levels of risk.
Read moreMulti-asset fixed income funds: Risk management when the rules are the same, but the game has changed - Angles & Perspectives
2021 is showing signs that four decades of declining global interest rates and inflation are coming to an end. A major cycle inflection changes the game for fixed income investors. It will become more and more difficult to earn inflation-beating returns while sticking to the rules of the game, being low levels of risk. In this case, the obvious question fixed income investors should be asking themselves is whether their strategy and toolkit are appropriate for a future that will look very different from the past.
Read more
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