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Global Investment Outlook

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January 25, 2021

What can we as an industry learn from 2020 to ensure our investment vision from here is clear and balanced?

2020 is a year few of us will miss. However, as investors we can learn and adapt from the bad times and the good. What follows in our “Outlook 2021” report is what we think investors should prioritise in portfolios during 2021. To be clear, our thinking extends beyond the short-term 2021 outlook – we ask ourselves, “what can and should be done in portfolios now to help maximise the chances of near and long-term success?”.

The nature of investing in a complex world is that change often happens slowly and then all at once. The three themes we highlight in this report (Policy shifts, rise of China and sustainability) are no different – we have selected them based on the view that they will drive meaningful change over the medium term, but we are not sure when or exactly how. A practical means of coping with this is by systematically monitoring those themes through thoughtfully-curated data. With this in mind we have developed three dashboards, which we will keep up to date and evolve over time.

Download our Policy Shift dashboard

We suggest investors focus on eight key priorities in 2021.

  1. Position for stronger near-term asset returns and lower long-term returns
  2. Revisit unlisted asset exposure
  3. Build a balanced exposure to China
  4. Maintain but evolve downside hedges
  5. Integrate climate risks and opportunities into portfolio construction
  6. Embedding inclusion and diversity in all levels of portfolio decision making
  7. Increase active management
  8. Monitor macro change
How investment focus has changed from 2020 to 2120 with respect to 3 main categories
Views on investment priorities have shifted since 2020.
Change how we work - Decision making in a different world: Governance Pre-2020: Calendar-based Post-2020: Fluid decision making Managing risk Pre-2020: Tracking error to benchmarks Post-2020: Draw-down and path dependency Change how we think - Big macro changes require a rethink and actions Inclusion and diversity Pre-2020: Aspirational Post-2020: Measured and managed Sustainability Pre-2020: Increasing awareness Post-2020: Increasing impact Change how we invest - A market full of opportunities Markets Pre-2020: US dominance and falling interest rates Post-2020: Rise of China Asset inflation vs. economic inflation Portfolio construction Pre-2020: Strategic asset allocation Post-2020: Total portfolio approach Active vs. passive Pre-2020: Risk of active Post-2020: Risk of passive Resulting portfolio Pre-2020: Simple Post-2020: Necessarily more complex

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