Asset managers have already stepped into a very different reality in 2021. This week, a new form of retail investor market vigilantism born on Reddit created billions of dollars of losses for hedge fund short-sellers of GameStop. At the same time, the world’s largest investment firm BlackRock has announced that it is starting to use its voice on company boards to embrace shareholder climate change activism.
“Asset managers are going to have to decide which of their prospective clients’ social views they are comfortable implementing,” said a portfolio manager at Lazard Asset Management, when asked about the greatest challenge for the industry to overcome in the year ahead. “Ultimately the question clients will ask is: ‘How much business did you forego on the basis of your moral views?’”.
Institutional Asset Manager’s Global Outlook report surveys the industry to explore the ways that asset managers are adapting to survive in the new era, with insights from Storebrand Asset Management, Lazard Asset Management, Wells Fargo Asset Management, MSCI, and many more.
New sustainable asset classes are likely to be beneficiaries of the movement to invest according to values in the year ahead, with the Climate Bonds Initiative predicting that a flood of new green bonds could drive the market for sustainable fixed income to another record high.
Another key challenge faced by asset managers is in finding fixed income returns, which have become harder to come by thanks to low real yields on bonds coupled with zero or negative interest rates in many countries.
This is driving some of the most established names in asset management, including BlackRock and Ruffer Investment Company, to consider allocating to digital assets such as bitcoin for the first time.
“Mainstream adoption by financial institutions could be around the corner, with bitcoin becoming an alternative to gold and government bonds,” noted Ruffer.
However, regulators remain sceptical, with the UK’s Financial Conduct Authority (FCA) stating that consumers who invest in cryptocurrencies “should be prepared to lose all their money”.
Editor, Institutional Asset Manager