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The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
As markets weigh the pros (vaccination progress and reopening economies) and the cons (worries about inflation and policy tightening) of the evolving macro environment, we are fielding many client questions about the backdrop for active management. As managers of multi-manager and multi-factor portfolios, we use our market efficiency framework to address the allocator’s perennial pursuit of balance between the cost of asset management fees and the benefits in terms of risk-adjusted returns. The least efficient markets, in our view, should be the best hunting ground for active managers and therefore command the largest part of the fee budget. In contrast, we tend to allocate less fee budget to the most efficient markets. But we also sharpen the focus of our manager research efforts in these efficient areas, to help identify the most attractive opportunities and improve the likelihood of alpha generation — an approach we call “reinventing the core.”
Across global equity markets, dividend levels have been driven to lows not seen since the late 1990s (Figure 1). What does this mean for income-oriented equity strategies going forward? We consider the answer through our team’s factor lens.
Evolving political environments and diverging COVID-19 recovery paths are among the drivers of dispersion between and within emerging markets (EMs) as we approach 2022. Meanwhile, technology adoption, infrastructure development, and urbanization are a few of the trends fueling growth across many of these markets. In this outlook, we explore how these factors impact opportunities and risks in Chinese equities, the potential for a bright future in India, and several enduring themes across EMs.
As we approach 2022, we believe — that electric infrastructure is critical to facilitating the energy transition and is therefore one of the most attractive sectors within the infrastructure universe. In this short piece, we highlight three reasons why we believe electric utilities look promising in the years ahead, as well as share our views on what the market is missing. This includes comments on key issues for 2022 like sustainability, regulations, inflation, and rising rates.
As 2021 comes to a close, the world is in various stages of recovery from the global COVID-19 pandemic. Notably, though the health care sector has performed well since the start of the crisis, it has lagged the broader market as consumer-oriented and information technology sectors benefited more from the reopening of the economy. While COVID-19 disruptions will continue for months, we believe strong fundamentals and robust innovation will fuel growth across health care sectors in the year ahead.
Breakthrough innovation in the biopharma industry — particularly in oncology, immunology, and certain rare diseases — is generating a rich opportunity set for specialist investors. Key medical technology companies are also facilitating significant drug development and are benefiting from the increased spending and proliferation of new drug candidates. Finally, diagnostics companies are helping with widespread COVID-19 testing while also creating more convenient routine medical tests and, increasingly, enabling early cancer screening.
Importantly, the overall delivery of health care continues to evolve. The US, for example, is experiencing a decades-long transition toward a fee-for-value payment system from a fee-for-service approach. This shift encourages new business models and supports substantial growth potential for lower-cost care models.
These tailwinds across the various health care subsectors, coupled with strong valuation support, leave us with a more positive outlook for the sector than ever before.
The future remains on sale, in our view, as we look to technology and innovation investing in 2022. In 2021, global markets were dominated by macro factors such as rising rates, supply-chain issues, disparate reopenings, and inflation concerns — causing fundamentals to take a back seat.
But critically, amid these macro factors, tech opportunities continue to be fueled by many structural tailwinds, including well-known progress in mobile payment penetration, automation, and essential hardware innovation. In this short outlook, four of our technology-focused global industry analysts and investors share their high-conviction ideas for 2022 within enduring tech themes.