Crystal ball

Natixis Study “Heading for the Light”

Natixis Investment Managers publishes the results of the 2021 Natixis Global Survey of 400 Fund Selectors

The Fund selectors of this study are independent financial advisors, wirehouses, registered investment advisors, insurance company investment platforms, private banks and family offices, representing $12.7 trillion in assets.

“Headed for the Light” reveals that even as they predict a risky investment environment marked by low to negative interest rates and higher levels of volatility in 2021, these fund selectors are positioning portfolios to capture the upside potential.

A risky world continues to struggle with Covid

Despite the newfound optimism provided by vaccines, 60% of fund selectors believe the Covid new normal is here to stay and and two-thirds predict that the global economy will not recover in 2021.

Significant concerns about Covid and politics have not necessarily translated into a negative view on markets, as 80% believe central bankers will backstop the market in the event of another downturn. Fund selectors consider the following factors to be the top portfolio risks in 2021:

  • 49% volatility
  • 39% negative interest rates
  • 37% inflation
  • 34% credit crunch
  • 25% liquidity

With the likely increase in fiscal and monetary incentives from policymakers, the fund selctors are focused on identifying investment opportunities under complex market conditions. Regardless of where they see the risks, fund selectors are likely to look at it as opportunity. Projections for year-end headlines suggest they will favor a risk-on approach :

  • 66% are saying aggressive portfolios will outperform defensive in 2021
  • 61% are calling for small-caps to outperform large-caps
  • 60% are predicting emerging markets to outperform developed markets

Active investment to outperform passive

83% of fund selectors indicate that while the opportunities are out there, it will require close analysis to find them in 2021.

70 % prévoient également que les investissements actifs surpasseront les investissements passifs cette année, therefore anticipating the potential for greater volatility and an outperformance of value stocks comparing to growth. Commitment to active strategies was significantly strengthened in 2020, as two-thirds of fund selectors say active investments in their company’s platform outperformed during the market downturn.

Professional buyers, however, fear that individual investors will not be able to positively manage the risks they will face in 2021.. The good market performance throughout the pandemic has therefore prompted retail investors to take more risk, and 78% of fund selectors fear that increased volatility will lead individuals to liquidate their investments prematurely.

As a result, fund selectors believe that their companies will evolve the investment offer in order to achieve greater consistency in their clients’ portfolios and thus better meet their needs, 80% of them declaring that the emphasis is on quality rather than quantity. Given the focus on riskier, more volatile assets and concerns about potential liquidations, it stands to reason that among the 295 professional buyers whose firms offer clients model portfolios, more than half (54%) anticipate that they will move more clients to model portfolios in 2021.

« Fund selectors have changed both their strategy and their product offering to better adapt to a market impacted by the pandemic and to better meet the new needs of their clients. The results of this study reinforce our conviction that active management and ESG strategies are relevant answers for fund selectors who are trying to take advantage of this market environment, create long-term performance and in a responsible manner, while optimizing risk management. »

Babak Abrar, Deputy Managing Director, co-head of distribution for French-speaking Europe at Natixis Investment Managers

One key area of focus is ESG

According to the results of the survey, professional buyers are particularly optimistic in terms of sector allocation, in particular on health – 56% of respondents considering that the sector will outperform – followed by consumer goods at 46%, information technology companies (45%), energy (44%) and financial services (44%).

One standout move shows that ESG is taking hold in fixed income plans as pro buyers anticipate adding more green bond strategies to investment platforms. Among the 53% surveyed who already invest in the asset class, 94% said they will look to increase or maintain their investments in 2021.. In order to access all market opportunities, more than half of fund buyers intend to complete their range of model portfolios and improve their range with specialized strategies in ESG and thematic investments.

In a context of low or even negative interest rates and weak growth, the survey reveals that value investing is making a comeback this year. As 2020 approached, fund buyers had focused their attention on sectors with high secular growth potential, while conversely, in 2021, 63% of fund buyers expect value stocks to outperform growth. .

36% of fund selectors surveyed intend to reduce their holdings in US equities in order to take advantage of opportunities offered by market performance in other territories, with 55% of them planning to acquire shares of the Asia-Pacific region.

Fund selectors are also looking to relocalize portfolios to seize opportunities offered by emerging markets outside of Asia, with 65% saying emerging markets are more attractive today than they were before the pandemic, and more than half (52%) confirm that they will increase their positions in these markets.

Survey is available here

Source: Natexis – “Headed for the Light”

Post Author: Wealth Monaco