I’m not one for predictions, especially when we’ve just lived through a year where many forecasts went out the window shortly after the ink on them had dried.
However I feel I’m on fairly safe ground with the prediction that investors will find themselves asking at least THREE of the following FIVE questions at some point this year:
- Where are we with emerging markets? With stretched valuations and tiny yields available around developed markets surely emerging market assets merit a place in any growth focused investment portfolio. But how are you doing this: equities, government bonds, corporate bonds, or a mix? Do you hold a separate view on China? what about Frontier markets? active or passive? and what about environmental worries and governance concerns?
2. Infrastructure – can I get more of it, where are the best investments? It seems to be the one thing everyone can agree on in the UK and it’s no secret we’ve got a lot of infrastrucure spending coming down the pipe (pun intended) but what does the UK government’s energy strategy mean for infrastructure investing? Are renewable energy assets going to become attractive again? Can the supply every match the seemingly insatiable demand? Are the juciest projects still going to remain with developers or be snapped up by large overseas investors? Will assets be in formats accessible to retail investors or will they remain the preserve of large asset owners that can deal with substantial private markets assets.
3. What’s our stance on net-zero carbon in your portfolio? What’s your framework and how are you implementing it. With the proliferation of funds this is something that even the smallest individual investors can now take a view on. Many large asset owners already have and now asset managers are starting to make commitments too.
4. Is the price to earnings ratio something helpful to look at? to be debated all day long, but to avoid confusion it might help to decide whether you think this can help your portfolio, or else stop focusing on it, or put it into context. Don’t get scared into bad decisions (my thoughts here).
5. What’s our chosen answer to the biggest portfolio puzzle? – the collapse in future returns has yet to be fully internalized by the investment industry which remains packed with funds that will deliver little, no or negative returns after fees. but what’s your plan for avoiding this? Hint: there are 9 answers, some good, some bad, some overrated.
What questions do you think investors are going to be asking, and answering?
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