This session takes an indepth look at an issue being discussed around every investment table… inflation.
It looks at whether inflation risk exists and how different asset classes behave in inflation regimes. It asks whether inflation is entirely negative for portfolios and under which scenarios inflation is desirable and controllable. It questions whether there is a new relationship between growth and inflation, or whether historic patterns will prevail and, if so, which ones.
Click here to view Patrick’s presentation slides[vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Patrick%20Zweifel%22%2C%22job_role%22%3A%22Chief%20economist%2C%20Pictet%20Asset%20Management%20(Switzerland)%22%2C%22content%22%3A%22With%20over%20two%20decades%20of%20experience%20at%20Pictet%2C%20Zweifel%20has%20been%20crucial%20in%20building%20the%20firm%E2%80%99s%20macroeconomic%20research%20capabilities.%20At%20Pictet%20Asset%20Management%2C%20he%20leads%20a%20team%20of%20four%20economists.%20Zweifel%20plays%20a%20key%20role%20producing%20research%20that%20helps%20shape%20the%20global%20investment%20strategy%20of%20the%20firm%20and%20which%20is%20fundamental%20to%20the%20investment%20decisions%20of%20fund%20managers.%20His%20analysis%20helps%20identify%20structural%20imbalances%20and%20business%20cycle%20turning%20points%20through%20the%20use%20of%20proprietary%20quantitative%20models%20and%20leading%20indicators%20on%20activity%20and%20inflation.%5Cn%5CnZweifel%E2%80%99s%20interest%20for%20emerging%20and%20Asian%20economies%20began%20following%20his%20work%20on%20International%20Economics%20for%20the%20World%20Bank%20and%20for%20the%20European%20Commission%20in%20the%20mid-1990s.%20He%20went%20on%20to%20teach%20econometrics%20and%20monetary%20theory%20at%20HEC%20Lausanne%20and%20HEC%20Gen%C3%A8ve%20until%20he%20joined%20Pictet%20Wealth%20Management%20in%201997%2C%20where%20once%20again%20he%20focused%20on%20emerging%20markets%20and%20currencies%20and%20rose%20to%20head%20of%20macro%20research.%20Zweifel%20then%20joined%20Pictet%20Asset%20Management%20as%20chief%20economist%20in%202009.%20He%20holds%20a%20PhD%20in%20Econometrics%20from%20the%20University%20of%20Lausanne.%22%2C%22image%22%3A%2244163%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Fpatrick-zweifel-pam%2F%3ForiginalSubdomain%3Dch%22%7D%5D” title=”Speakers” el_class=””][vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Amanda%20White%22%2C%22job_role%22%3A%22Director%20of%20institutional%20content%2C%20Conexus%20Financial%20(Australia)%22%2C%22content%22%3A%22White%20is%20responsible%20for%20the%20content%20across%20all%20Conexus%20Financial%E2%80%99s%20institutional%20media%20and%20events.%20She%20is%20responsible%20for%20directing%20the%20bi-annual%20Fiduciary%20Investors%20Symposium%20which%20challenges%20global%20investors%20on%20investment%20best%20practice%20and%20aims%20to%20place%20the%20responsibilities%20of%20investors%20in%20wider%20societal%2C%20and%20political%20contexts%2C%20as%20well%20as%20promote%20the%20long-term%20stability%20of%20markets%20and%20sustainable%20retirement%20incomes.%20She%20is%20the%20editor%20of%20conexust1f.flywheelstaging.com%2C%20the%20online%20news%20and%20analysis%20site%20for%20the%20world%E2%80%99s%20largest%20institutional%20investors.%20White%20has%20been%20an%20investment%20journalist%20for%20more%20than%2020%20years%20and%20has%20edited%20industry%20journals%20including%20Investment%20%26%20Technology%2C%20Investor%20Weekly%20and%20MasterFunds%20Quarterly.%20She%20was%20previously%20editorial%20director%20of%20InvestorInfo%20and%20has%20worked%20as%20a%20freelance%20journalist%20for%20the%20Australian%20Financial%20Review%2C%20CFO%2C%20Asset%20and%20Asia%20Asset%20Management.%20She%20has%20a%20Bachelor%20of%20Economics%20from%20Sydney%20University%20and%20a%20Master%20of%20Arts%20in%20Journalism%20from%20the%20University%20of%20Technology%2C%20Sydney.%20She%20was%20previously%20a%20columnist%20for%20the%20Canadian%20publication%2C%20Corporate%20Knights%2C%20which%20is%20distributed%20by%20the%20Globe%20and%20Mail%20and%20The%20Washington%20Post.%20White%20is%20currently%20a%20fellow%20in%20the%20Finance%20Leaders%20Fellowship%20at%20the%20Aspen%20Institute.%20The%20two-year%20program%20consists%20of%2022%20fellows%20and%20seeks%20to%20develop%20the%20next%20generation%20of%20responsible%2C%20community-spirited%20leaders%20in%20the%20global%20finance%20industry.%22%2C%22image%22%3A%2235225%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Famanda-white-101a7515%2F%3ForiginalSubdomain%3Dau%22%7D%5D” title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Inflation is set to rise further but the consequences are not all bad
It is important to distinguish between the two sources of inflation – supply side or demand side and how each feeds into different cycles.
Goods have a much lower share in most inflationary indices compared to services.
Uncertainty about consumption spending could cool inflation as could uncertainty about how much of this spending will be tilted to services.
Avoiding risk assets when growth is low; good inflation hedges include gold and inflation linked bonds.
Inflation can occur in a period of strong or low growth.
Emerging market equities and fixed income (hard and local currency) also offer investors opportunities, performing well in a climate of strong growth and rising inflation.
Investors should look at emerging markets in the context of their own growth, rather than comparing growth to developed markets.
The big difference between the vaccine rollouts and the scale of the stimulus measures across the world could result in a K-shaped global economic recovery, with much of the developed world booming but poorer countries continuing to struggle. However the
Panellists discuss the possible impact of corporate failures on European banks coming out of the pandemic, and note central banks juggling act around digital currencies; unable to halt their arrival but still having to marshall progress and ensure the technology doesn’t weaken financial stability. The session examined the structural trends in the financial sector that have been entire amplified or altered by the COVID crisis.
Bridgewater’s co-CIO Bob Prince explains the perils of MP3 and suggests investors need to think differently, shaping strategies around cash-flow yields - connecting equity cash flows to stable sources of spending in the economy.
Investors need to ensure they are accessing the new economy if they are to benefit from the growth story that drives emerging markets returns. Investors at the Fiduciary Investors Symposium talk about how they allocate to emerging markets.
One of the silver linings of the pandemic has been that location is not a restraint on investment when it comes to investing in venture capital with investors seeing venture opportunities springing up in all corners of the world.
The interruptions to work and the revolution of technological tools in 2020 have changed thee way investors assess funds managers. A discussion around due diligence in a lockdown environment finds that allocators have tended to stick with existing relationships through the pandemic making it difficult for managers approaching investors for the first time to form relationships and win mandates.
The sharp market falls triggered by the pandemic brought the longest recovery ever in modern finance to an abrupt end. But despite the turmoil unleashed by COVID, it has not wrung out the market excesses of the last 13-year cycle. It means another wave of corporate failures could appear on the horizon in a shorter timeframe than expected, and offer more opportunities for distressed debt investors, according to Victor Khosla founder of SVP Global.
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