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Trending for the Long Term
Market activity in the past few weeks has reminded us of the dangers of speculation. A small number of early investors make vast profits at the expense of a much larger number of late entrants who end up losing their shirts. Our philosophy has always been to look beyond the next "big trade" and stay focused on what matters most, helping our clients achieve their financial goals with predictability and consistency.
Market trends
As we look ahead to determine our portfolio positioning, three burgeoning trends drive our strategic vision.
Digitalization: It’s highly likely that digital goods and services will continue to make up a larger share of the overall economy. Rampant innovation and exponential improvement in processing power have permanently altered the way we consume and conduct business. The COVID-19 pandemic has only accelerated the trends that were already developing, including shifts towards online shopping and working from home.
Decarbonization: We expect there will be a secular shift away from fossil fuels and towards sustainable energy. Major governments are already implementing initiatives to reduce greenhouse gas emissions and meet climate change targets, and investors have begun to reallocate capital away from traditional energy industries. We believe that these trends present both risks and opportunities for entire sectors over the long-term.
Debasement: Aggressive monetary and fiscal policy measures have drastic implications for our strategic equity and fixed-income exposure. Central bank balance sheet expansion and large fiscal stimulus packages are being funded by money printing, which has sharply increased money supply and threatens currency debasement. We believe that these actions increase the likelihood of inflation, which means investors need more exposure to assets that can protect purchasing power (equity, alternatives) and less to assets with fixed payments (bonds).
Portfolio management and positioning enhancements
In order to compete in a world of increasing digitalization, changing investor preferences and currency debasement, we have made the following enhancements to our investment platforms.
Asset mix flexibility: We have increased the flexibility of our investment platforms to capitalize on tactical opportunities across four levers: asset class, region, factor and sector. In a world of low interest rates, top-down asset allocation is more important than ever in helping our clients achieve their financial goals with predictability and consistency.
New managers: We’ve added new investment strategies that are well positioned to benefit from current market trends. Munro Partners, for example, has an impressive track record of identifying secular winners in global equities. The firm relies on a unique investment philosophy that eschews the standard definitions of region and sector, and instead segments investments into secular, sustainable growth trends labelled as “areas of interest,” adding a new perspective on investment opportunities.
Alternatives: We recently introduced investments in private equity, private debt and private infrastructure. These holdings are expected to provide several benefits, including low correlation to our existing portfolio holdings, higher return potential, absolute return focus and a smoother return profile. We are starting with smaller allocations to familiarize ourselves with the structure and investment process, then slowly add to the positions as the funds get off the ground. Our early participation should put us in a favourable position to make larger allocations when the managers are ready to call capital.
Source: Bloomberg Finance L.P. and CI GAM | Multi-Asset Management as at February 10, 2021.
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This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication. Market conditions may change which may impact the information contained in this document. All charts and illustrations in this document are for illustrative purposes only. They are not intended to predict or project investment results. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies.
The opinions expressed in the communication are solely those of the authors and are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed.
The author and/or a member of their immediate family may hold specific holdings/securities discussed in this document. Any opinion or information provided are solely those of the author and does not constitute investment advice or an endorsement or recommendation of any entity or security discussed or provided by CI Global Asset Management.
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what CI Global Asset Management. and the portfolio manager believe to be reasonable assumptions, neither CI Global Asset Management nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.
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Published February 12, 2021.
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