In the aftermath of the GFC, economic growth stalled. In a low inflation, low interest rate world, central banks and governments reacted with expansionary policies that made money easily available and very cheap.
As a result asset prices surged, yielding impressive returns even for passive investors.
However the world has changed.
In essence Covid, supply chain disruptions, increasing geo-political tensions, climate change and inflation have shattered old precepts about managing the economy.
And what is clear is that relying on past strategies is fraught with danger.
Divergence occurs when the price of an investment pulls away from the others.
Active managers pounce on this opportunity to create additional returns in their portfolios.
The active managers have not had an opportunity this good in over two decades; it is their ‘time to shine’.
And the active managers have identified several significant opportunities arising from these structural upheavals:
1. High inflation rates have given bonds an attractive rate of return not seen in decades.
There are bond funds delivering 9% p.a. It is hard to overstate how significant that is. Bonds are a defensive, low risk low yield asset. Now they can deliver growth assets returns.
People may need to rebalance their risk profiles.
2. Climate change is driving an inexorable shift to renewable energy.
And when you have:
- the governor elect of the RBA
- the CEO of Black Rock, the largest money management firm in the world, with some 10% of global investable assets in its portfolio
- and governments
on board, you know it’s going to happen. Irrespective of any valid sceptical concerns.
Rare earths and minerals are critical to this transition and are about to enter a boom phase.
3. The aging population in many countries around the world is putting immense strain on governments’ budgets.
Healthcare is a rapidly growing cost.
Innovative medical devices and new approaches to treatments can save many billions at a global level.
Med tech is another opportunity.
Live Webinar with Q&A: The new investment realities
Recently I held a webinar with Glen Foster, Head of Risk and Senior Portfolio Manager at Atrium. We unpack the new investment landscape – and give guidance on how you can thrive in this new world order.