The ALPIMA Year Ahead Summit took place on Thursday 19 Nov at 14:00 GMT.
Expertly moderated by Tom Standage, Deputy Editor of The Economist and “The World In ….” series, the event was a roundtable of esteemed figures from the industry discussing key topics for 2021
• Bob Litterman - Bob is the co-developer of the famed Black-Litterman Global Asset Allocation Model and Founding Partner and Chairman of the Risk Committee at Kepos Capital.
Bob, who received numerous awards, serves on several boards, including Commonfund, where he was elected Chair in 2014, Options Clearing Corporation, Resources for the Future, Robert Wood Johnson Foundation, World Wildlife Fund, and the Sloan Foundation. He is also serving as the chair of the CFTC Climate-Related Market Risk Subcommittee.
• Andrew McCaffery - Global CIO at Fidelity International. Andrew has over 30 years’ industry experience across investment, risk management and client distribution.
• David Riley - Chief Investment Strategist at BlueBay. David has more than 20 years of applied macroeconomic, policy and sovereign credit experience.
• David Baverez - Author, entrepreneur, investor and ALPIMA Board Member. David is the author of “Beijing Expresss” (Westphalia Press, 2017) and “Generation Tonique” (Plon, 2015).
The topics discussed covered five main themes:
- Digital Acceleration – Andrew McCaffery pointed out that digital tools are now the norm and expected to remain important in 2021 and beyond, with 5G expected to further accelerate the trend, noting however that building new relationships may continue requiring in-person meetings in some areas, David Baverez discussed how technology allows for hyper customisation through the digitisation of the front office, an area China has been more focused on, so far, than the West, where technology has been used more to digitise the back office in order to reduce costs. Expect the digitisation of the front office to be in important theme in 2021 and beyond.
- ESG/SRI – Described by David Riley as the biggest change experienced in Asset Management in his career, ESG / SRI was unanimously described as a game changer by all speakers, with millennials and institutional investors alike focused on it.
The pandemic has further increased the focus on ESG across the industry. Bob Litterman discussed Climate Risk and Carbon Pricing, saying that time is a scare resource, but hopefully strong global incentives are coming.
Make no mistake - ESG has become a core subject. As Andrew McCaffery said, it is being put at the top of the agenda and is discussed explicitly in almost every client meeting.
- Macro – Especially regarding ultra-low rates and their impact on asset allocation, and whether investors should worry more about inflation or deflation - The panel agreed rates may be ultra-low in the West and Japan, but not in China, highlighting the fact that global investors will naturally seek higher income and yield in places where they persist, whether it be in alternative assets, alterative strategies or capital markets like China that are expected to deepen in 2021 and beyond. David Riley made a compelling case for Fixed Income highlighting opportunities in active management and alternative strategies. As for inflation vs deflation, several nuanced views were shared, with Andrew McCaffery noting that while deflationary forces are still there, we could see inflationary pressures building up in the medium term.
- US-China – David Baverez described the situation not as a Cold War, but as a Cold Peace, with significant trade links strengthening despite the rhetoric. With China only 3% global portfolios and 15% of the world’s GDP and a third of global growth, expect China to attract global investors in 2021 and beyond. Chinese fixed income, in particular, looks like a compelling case for USD-based investors. Andrew McCaffery spoke further about the transformation and deepening of capital markets in China with upcoming new regulation and a pension system roll out on the way.
- The future of investment management - The panel covered a wide range of themes – including the continued rise of passive, increased market efficiency, the growing role of quantitative techniques and AI, and what passive 2.0 means, i.e. custom indexing and ESG making its way to strategic asset allocation.
- Q&A – The Q&A touched on the growing role of AI and quantitative techniques in investment management, US-China decoupling, and the degree of ESG understanding within markets.
- As for surprises for 2021 – Each participant discussed possible surprises for 2021. We will write a piece shortly on the topic.
Huge thanks to all participants for an insightful event, to all attendees for their time and input, and to all involved at ALPIMA for making it possible.
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