Investment Insight: Thought-provoking analysis of key investment issues

Our series of Investment Insight papers deliver thought-provoking analysis of key investment themes. Through focused and unique insights into topical issues, we seek to provide investors with a deeper understanding of the current challenges and opportunities within global investment markets.

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Populism and the threat to Globalisation

We live in an era of globalisation. And an era of increased income inequality. Are the two linked? And are they the driver behind the rise of populist parties in Europe, the election of President Trump, Brexit? In this paper we explore these issues alongside the social and cultural changes that have happened in tandem. We consider the implications for the future of globalisation and for markets.

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Jeremy_Lawson

Jeremy Lawson

Chief Economist

 

Human Rights - Implications for companies and their investors

Companies have a responsibility to ensure that their actions do not violate or infringe upon the human rights of their stakeholders. Failing to manage human rights risks in business may result in operational and reputational impacts.

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The Investment Challenges of Decumulation, Part 2

Following on from our paper 'The Investment Challenges of a Decumulation World', this second paper explores further the investment aspects of the decumulation challenge. In particular, it seeks to illustrate: – the substantial added value of a multi-asset growth approach to savings in retirement compared with passive equity, even after fees and – whether there is a single ‘drawdown’ level that is appropriate for all.

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The impact of slowing working-age population growth

The developed world is at a turning point – growth in the working-age population has peaked, economies are slowing, and voters are displaying scepticism for immigration. This raises questions over how economies can grow without more people of working age to wield a shovel or tap a keyboard. In turn, this has implications for real estate and the number of new buildings needed in the future. In this paper, we focus on the economic and commercial real estate impacts of slowing growth in the working-age population.

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Lower For Longer

With future investment returns likely to be lower than previously enjoyed, what can investors do to increase returns. This paper suggests if market beta contributes less to overall returns than before, alpha will become an ever more important return component . We discuss how alpha can be captured across equities, bonds and private markets.

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Jonathan Price

Jonathan Price

Global Head of Product & Investment Specialist

 

Impact investing

Impact investing – once a niche corner of the market – has entered the mainstream. This has been driven by increasing awareness among investors of the important role they can play in order to help address the world’s many environmental and social challenges. Impact investing allows them to meet this desire – while still seeking a financial return. This paper looks at the various types of impact investing, how it is measured and what lies ahead for this compelling proposition.

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Amanda Young

Amanda Young

Head of Responsible Investment

 

Time to rewrite the UK’s fiscal rulebook

The first in a series of Public Policy Perspectives, a new research publication that aims to broaden the debate on policy issues across a range of economies and make neutral, evidence-based recommendations.

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James McCann

James McCann

UK/European Economist

Stephanie Kelly

Stephanie Kelly

Global Strategy Analyst

 

The benefits of growth with lower volatility

In this paper, we look at some ways of managing volatility and demonstrate how the inclusion of a low-volatility growth strategy can provide a superior overall solution. We go on to introduce an ‘enhanced-diversification’ approach, a concept we developed to achieve reduced volatility without compromising growth potential.

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David Bint

David Bint

Investment Director

Malcolm Jones

Malcolm Jones

Investment Director, Absolute return and multi-asset investing

 

Global Real Estate Update

A quarterly look at the key themes driving global real estate, plus detailed insight into the regional markets and our latest real estate House View.

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The Investment Landscape

The investment landscape has changed dramatically over the last 20 years. It has certainly become more complex and volatile. As a result , investor needs have evolved, evidenced particularly by the increase in outcome-orientated approaches. This paper explores why success in decoding client, market and portfolio signals is crucial to ensuring asset managers create value for their clients.

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Guy Stern

Guy Stern

Head of Multi-Asset & Macro Investing

 

Absolute Return Bond Strategies

In this paper, we examine the case for absolute return fixed income investing and the key attributes of these investment solutions.

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Alex Gitnik

Alex Gitnik

Investment Director

 

Leisure in the UK Retail Environment

As the digital era has made shopping more convenient for consumers, the need for retailers to deliver a unique physical shopping experience is increasingly important. Leisure (including food & beverage, cinemas and entertainment) has a significant role to play in this ever-demanding retail landscape. In the latest paper from our real estate research team, we examine leisure’s growth as part of a retail offering and seek to establish whether there is a clear link with rental growth. In doing so, we investigate leisure’s influence on both shopping centre assets and major UK town centres.

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Forward-Looking Scenario Analysis

Historical stress testing is now an established approach to tail-risk management. However, there is less consensus on how best to undertake forward-looking scenario analysis. This paper examines how we might incorporate expert opinions into projections of portfolio outcomes. We also illustrate that using a diversified multi-asset approach can help mitigate losses in such extreme market scenarios.

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Malcolm Jones

Malcolm Jones

Investment Director, Absolute return and multi-asset investing

 

Evaluating Multi-Asset Strategies

To fairly evaluate the performance of a multi-asset portfolio requires looking beyond simple correlation measures. In this paper, we discuss the limitations of correlation and propose a range of techniques to help us appraise the effectiveness of a multi-asset strategy.

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Stuart Peskin

Investment Director, Multi-Asset Strategies

 

UK Pension Reform - One Year On

The 2014 UK pension reforms have implications for pension savers and providers. In this article, we assess some of the developments that have occurred throughout the year and compare DC savers’ actions with those expected when the changes were announced. We also look at what DC plan providers might do to ensure individual member needs can be accommodated.

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Malcolm Jones

Investment Director, Absolute return and multi-asset investing

 

Food Security in China

China is the world’s most populous country. As such, issues around food production are of paramount importance. This extends to the environmental and social risks associated with the food industry. These include water scarcity, pollution and food safety standards. Rebecca Maclean, Responsible Investment Analyst, recently visited China, meeting with companies, government officials, specialists and farmers to discuss key issues surrounding the sector. This paper highlights her intriguing findings and their implications for investors.

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Amanda Young

Amanda Young

Head of Responsible Investment

 

Shopping for opportunities in UK retail

The UK retail sector remains under pressure following years of neglect and mismanagement, poor economic conditions and the rise of online retailing. However, the short-term prognosis for the retail sector currently looks better than it has done for some time. The UK is enjoying a reasonably robust economic backdrop, consumer confidence is buoyant and disposable incomes are improving. Against this backdrop, selecting the right assets in the best areas is vital. In this paper, we examine the current state of the UK retail sector and provide proprietary analysis on where we see the best opportunities and those areas to avoid.

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Considering ESGP For Emerging Market Sovereigns

A country’s creditworthiness is fundamentally dependent on its competitiveness and ability to sustain economic growth over the long term. To assess this, investors traditionally look at a range of macroeconomic variables, including public debt, inflation, fiscal deficits and current account balances. Along with political and governance factors, these are enablers of economic development and elements of the country’s willingness and ability to repay its debt.

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Richard House

Richard House

Head of Emerging Markets

Amanda Young

Amanda Young

Head of Responsible Investment

 

Managing a Matching Adjustment Portfolio

The Solvency II Directive codifies and harmonises EU insurance regulation. The directive, in force since 1 January 2016, relates primarily to the amount of capital insurers within the EU must hold in order to reduce insolvency risk. The purpose of this paper will be to examine, from an investment manager's perspective, how EU insurers can use Solvency II's Matching Adjustment (MA) provisions. The MA provides insurers with a capital efficient mechanism for holding eligible long-term assets to match eligible life or annuity insurance obligations.

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Iain Forrester

Iain Forrester

Investment Director, Insurance Solutions

 

The Rise of the Millennials

The financial industry and the products it supplies have always evolved to meet market challenges and opportunities. Today is no different. One of the key factors that will drive the industry over the coming years is the rise in prominence of the so-called Millennials (also known as Generation Y). This is the generation born between the early 1980s and 2000. The expectations and values of this tech-savvy group differ from those that have gone before them, most notably when it comes to social, economic and environmental issues.

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Amanda Young

Amanda Young

Head of Responsible Investment

 

Unconstrained Investing - The Freedom to Perform

What exactly is 'unconstrained investing'? More importantly, why do investors increasingly need to consider this key investment strategy as a complement to their equity allocation? This paper explains the significant return, risk and diversification benefits that unconstrained strategies can bring to portfolios.

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Mikhail Zverev

Mikhail Zverev

Head of Global Equities

 

Solvency II & Absolute Return Investing

In this paper, we examine the important implications of Solvency II, the latest European Union Directive designed to harmonise insurance regulation across member states. In particular, we highlight how the risk-based nature of the Directive, together with its 'look-through' requirement, confirms the underlying risk efficiency of well-diversified absolute strategies. We also show how these strategies can be used to improve capital-efficient returns.

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Bruce Porteous

Bruce Porteous

Investment Director, Insurance Solutions

Craig Turnbull

Craig Turnbull

Investment Director, Insurance Solutions

Iain Forrester

Iain Forrester

Investment Director, Insurance Solutions

 

The Environment – Considerations for companies and investors

This paper outlines how environmental risks and opportunities can influence company valuations, the sectors most exposed and our approach to integrating these considerations into the investment process.

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Rebecca Maclean

Rebecca Maclean

Responsible Investment Analyst

 

Optimal Matching Adjustment

Solvency II is an extremely important EU directive with significant implications for UK and European insurers. One of the issues which need to be considered is how to optimise the Matching Adjustment. In this paper, we discuss the gains available to insurers prepared to consider actively constructing optimal MA asset portfolios.

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Bruce Porteous

Bruce Porteous

Investment Director, Insurance Solutions

 

Anti-Bribery and Corruption

The clandestine practices of bribery and corruption are often seen as ‘how business is done’ in certain sectors and regions. However, these views are starting to shift, as governments, companies, investors and civil society demand that these practices be eradicated. In this paper, we examine the risks and challenges facing investors in this complex area and outline our approach to ensuring better client outcomes.

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Andrew Mason

Andrew Mason

Responsible Investment Analyst

 

Stranded Assets – Challenging the status quo

Fossil fuels have been integral to global economic development. Recent research questions whether oil, gas and coal assets will be extracted and burnt indefinitely. In light of climate regulation, we consider environmental, social, political and economic factors that are changing the outlook for fossil fuels and the implications for long-term investors.

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Rebecca MacLean

Rebecca Maclean

Responsible Investment Analyst

 

The Investment Challenges of a Decumulation World

The 2014 reforms set out in the Budget provide UK pension savers with significantly greater freedom than they have had to date. The reforms are likely to have major implications for DC scheme investment strategies — in particular for the lifestyle strategies adopted, and for individuals’ investment choices regarding the post retirement period. In this paper, we examine some of these challenges. To do this, we model different investment strategies using historical financial and economic data, to determine the impact on member outcomes and the certainty of achieving these.

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Malcolm Jones

Malcolm Jones

Investment Director, Absolute return and multi-asset investing