Against the backdrop of today’s investment landscape, there is a clear case for selective strategies that tap into emerging themes while also providing resilient returns, growth potential and portfolio diversification.
This is particularly important in the wake of the spike in valuations following market lows at the end of the first quarter last year. While economic recovery is underway with risks still to be monitored, a more focused approach to asset allocation and portfolio construction is key to capture growth in 2021 when normality returns.
Despite equity markets looking “frothy” at current levels, John Cappetta, head of private banking, Asia advisor at Ninety One, sees opportunities and scope for more upside – even if at a slower pace than some investors prefer. In the fixed income space, meanwhile, following the substantial inflows into bond funds over the past five years, investors again need to be selective going forward, he added. In line with these trends, investors require a robust and disciplined investment style to tap into opportunities that stem from relevant themes, such as the environment.
Ninety One is well-positioned to deliver this. “For many of our key fund offerings, we take a high-conviction approach,” explained Cappetta.
Targeted strategies are also increasingly important given the growing likelihood of rising inflation at some point soon, due to unprecedented monetary and fiscal policies in response to the pandemic.
“Investors need to structure their portfolios to adapt to periods of rising inflation and interest rates,” said Cappetta.
Going green with conviction
The unprecedented inflows into sustainable funds in Asia throughout 2020 reflect the growing appetite among investors to tackle climate change by engaging with companies, in parallel with an acceleration in the transition to a lower-carbon economy due to Covid-19.
Mirroring the focus of Ninety One’s Global Environment Fund, there are three main pathways to a low-carbon future including renewable energy, electrification and resource efficiency.
Three themes to a low-carbon economy
As a result, the firm received regulatory approval for this fund in Singapore late last year, following its earlier authorisation in Hong Kong. In short, the bottom-up approach aims to invest in companies with structural growth, sustainable returns and competitive advantages in decarbonisation.
Ninety One takes a high-conviction approach to capture growth opportunities in the low carbon transition, based on in-depth research as part of an investment process that aims to ensure any holding in the portfolio will tick the boxes of doing good plus generating long-term returns.
“This is no fad,” added Cappetta. “Clients want to find value in companies that are less well-known but can provide alpha, rather than just popular big tech names.”
Growth potential in Asia
More broadly, given low interest rates and the economic impact of the pandemic, there is also growing potential for a comeback in emerging markets (EM) assets, especially in Asia.
As a result, 2021 could result in robust portfolio performance. Chinese government bonds, for instance, offer an interesting alternative to developed government bonds.
Ninety One’s Emerging Market Investment Grade Corporate Debt Fund, for example, is well-placed to tap into the opportunities in EM debt.
Indeed, its track record in these assets was acknowledged by numerous awards last year; it was named ‘Emerging Markets Manager of the Year’ by Financial News, along with multiple accolades across its other capabilities by other media, including Bloomberg Businessweek and the Benchmark Fund of the Year Awards 2020.
Solid foundations for growth
These achievements are key building blocks in Ninety One’s ambition to continue to grow organically. “We have the culture and track record from the past 30 years to continue to increase our Asian footprint,” said Cappetta.
Change was the central theme of 2020 as well as for Ninety One. The firm embraced a significant transformation in the form of a demerger from its parent company Investec Group, a dual-listing and a global rebranding in March, when markets were at their most challenging and uncertain.
“Started in South Africa in 1991, the firm has experienced change and is equipped to adapt when change comes. This mind-set has also helped us to perform well in Asia in terms of our partnerships with some of the private banks and regional retail banks,” said Cappetta.
Indeed, the firm’s deliberate focus on the markets and assets in which it has the people, track record and experience, has helped to open doors to new relationships, he added – as long as there is consistency in processes and returns. “The firm has been around long enough, offering the right products at the right times, and is now starting to see fruits of these efforts,” reinforced Cappetta.
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 Source: Financial News, 4 November 2020.
 Source: Bloomberg, based on performance as of 30 September 2020.
 Source: Benchmark, based on performance as of 30 June 2020.
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