A constant job of any market analyst is trying to determine themes and flows from big money managers. While the behavior of big guys matter, this does not mean investor should always follow the lead of large managers. Large manager allocation changes and expectations create headwinds and tailwinds against which smaller managers have to navigate.
Invesco recently published their Global Sovereign Asset Management
Study 2019. The report focuses on sovereign wealth funds and central
banks totally about $20 trillion in AUM and adds to our knowledge of what large
managers are thinking. The base portfolios are actually consistent with many
other large managers, like endowments, who do not have to worry about
short-term liquidity.
A common theme is the build-up of illiquid alternatives which includes real estate, private equity, and infrastructure. This growth in the illiquid is occurring in spite of the almost 90 percent believing that the economic cycle will end in 2 years or less. There seems to be a strong desire to buy assets that will generate yield/return beyond the economic cycle. The demand for private equity and illiquid assets is alive and well with these big asset managers. Of course, given their size the choices for investing are more limited. While fixed income and cash are both growing this year, manager behavior does not seem defensive.
Interestingly, central bank portfolios show a marked increase in diversification and liquidity. In general, central bank portfolio maintain a higher degree of liquidity than traditional sovereign wealth funds, but this shift in behavior provides a contrast worth further discussion.
A common theme is the build-up of illiquid alternatives which includes real estate, private equity, and infrastructure. This growth in the illiquid is occurring in spite of the almost 90 percent believing that the economic cycle will end in 2 years or less. There seems to be a strong desire to buy assets that will generate yield/return beyond the economic cycle. The demand for private equity and illiquid assets is alive and well with these big asset managers. Of course, given their size the choices for investing are more limited. While fixed income and cash are both growing this year, manager behavior does not seem defensive.
Interestingly, central bank portfolios show a marked increase in diversification and liquidity. In general, central bank portfolio maintain a higher degree of liquidity than traditional sovereign wealth funds, but this shift in behavior provides a contrast worth further discussion.
The big themes for sovereign funds mirror the views of all investors; however, the focus seems to be greater on geopolitical stress than any single investment theme. The leading themes are all ones that will impact long-term global investing as opposed to near-term declines.
In the survey, Invesco reviews a number of themes beyond the shifts in an aging market cycle such as the movement to China investments, ESG investments and the continued increase in technology investing. A quick read will provide useful information on how another group of investors look at the investment choice set.
No comments:
Post a Comment