Asset management gets even harder

For asset managers, next year is shaping up to be challenging, to say the least. Faster inflation will prompt central banks to slow, stop and possibly reverse their monetary support of economies, making financial markets trickier to negotiate. The pandemic is far from over. The industry will face even more pressure to allocate assets in environmentally friendly ways without drifting into greenwashing. And the urge to merge, with size bringing benefits of scale to alleviate the relentless downward pressure on fees, remains omnipresent.
The climate emergency can’t be ignored. But governments, not financial firms, need to be at the forefront of implementing policies that reduce carbon emissions. “Trying to force an industry that’s designed to pursue profit to become the climate-change sheriff sounds a bit like foxes guarding henhouses.”
Buying a lottery ticket seems like a waste of money, given the odds are so stacked against a win. But it’s cheap way to purchase a few hours of daydreaming about a life of luxurious leisure. And in many national lotteries a chunk of what you spend goes to funding good causes. It’s a win-win.
Norway’s sovereign wealth fund can’t offer even its best traders the kind of remuneration they’d earn working for a hedge fund. Instead, it permits “an unusual degree of freedom” to an elite cadre of its portfolio managers who manage the active portion of its $1.4 trillion of assets — a strategy that’s delivered better returns in recent years compared with its passive investments.
The Robinhood crowd became a force to be reckoned with this year, banding together in chat rooms to take on professional traders. But a study by Daniel Taylor, a professor at the Wharton School, suggests company executives indulge in widespread insider trading. That’s not a good look for capitalism, still tarnished by the global financial crisis, as the democratization of finance starts to gather pace.
Portfolios invested 60% in stocks and 40% in bonds have been a mainstay of fund management for years. But the fixed income side of the strategy has faltered recently, failing in its role of cushioning returns when equities decline. Bitcoin, which in theory is uncorrelated to either asset class, could provide an alternative ingredient for investors able to stomach its volatility.

—Bloomberg