MoneyMarketing April 2021

Page 19

30 April 2021

INVESTING

Active opportunities from extreme polarisation in equities BY JANICE ROBERTS Editor: MoneyMarketing

S

etting the scene for the rest of this year, Fabiana Fedeli, Global Head of Fundamental Equities at Robeco, believes that vaccines, central banks and government stimulus will support the macro recovery. Equities are Robeco’s favourite asset class – and within equities, emerging markets are favoured – while in fixed income, credit is preferred to government bonds. Importantly, the extreme polarisation in equities witnessed in 2020, will provide “significant investment opportunities for active investors”, Fedeli says. In addition, there are three clear long-term trends that investors will have to take exposure to: China, sustainability and smarter value. However, she warns that investors will need to stay selective. The policy trilemma Policymakers are confronted with a trilemma between public health, the economy and personal freedom when it comes to managing the COVID-19 outbreak. “The solution to this is the vaccine – the timeliness, the effectiveness, and a return to a new normal will shape 2021,” Fedeli says. Robeco’s base case is premised on four elements: 1. Additional vaccines are approved in the first half of 2021. Global distribution is largely achieved but not without temporary hiccups and setbacks, while some social distancing measures remain. 2. Fiscal and monetary policy remain (very) accommodative with a high degree of mutual cooperation. 3. The outbreak is a disinflationary shock, but as economies open up and continue their recovery, inflation starts to turn, and earnings to rise.

4. US elections: The victory of the Democratic party with a relatively small majority in Congress means more fiscal expenditure and a limited increase in taxes. “Our favourite asset class this year is equities. We favour emerging markets equities, followed by Europe. And we also see some interesting but selective opportunities in Japan. Within emerging markets, we like North Asia, but we’re also starting to see opportunities elsewhere,” Fedeli says. She sees global equities as gaining between 10% and 16% this year. The most important element to monitor for the equities outlook is COVID-19, as investors shift their attention from infection rates to vaccination rates. In the technology sector, Robeco is not keen on what Fedeli calls “the high-flying digital COVID defensive sectors”, preferring other areas in the sector, particularly hardware and lesser known companies.

“We like the enablers of sustainability as a theme – sustainability has done very well in the market. We like materials, healthcare and discretionary consumption and we like financials, but we’re sticking to the higher-quality balance sheets.” China, value and sustainability Fedeli sees three clear trends unravelling as the path to normalisation continues. 1. China is destined to become a core allocation China is the second largest equity market in the world. It’s a third of the size of the US market but is far larger than other markets. “We can’t ignore it. China’s presence in the MSCI index is also increasing because the government is frequently opening investment in the domestic market to foreign investors,” she says. 2. Smart value will return According to Fedeli, value investing will continue its return. “We’ve seen this since November 2020, but we believe that we have to look for smarter alpha value. Cyclical stocks will do well but we also believe we have to be careful. We really have to look at those companies that are able to innovate.” 3. Follow the green signs as COVID-19 has increased the stakes Sustainable strategies have had far stronger inflows than the rest of the mainstream strategies in equities. “We believe this is a trend that is destined to continue, and it is a trend to which investors should gain

exposure, as governments will continue to pour more fiscal support into environmental protection.” Active opportunities from extreme polarisation While the rally after the COVID-19 sell-off in March 2020 was driven by a handful of mega-cap tech names, there are still plenty of opportunities, Fedeli says. “In 2020, the S&P 500 top five stocks were up 65%, and the other 495 were up 10%. In emerging markets in 2020, the top five were up 47%, and the other 1 375 were up only 11%. This means that as active investors, if we look for those companies that have strong fundamentals that are driven by similar trends as the top five – and many others that are exposed to the economic recovery – we can actually find some really strong opportunities.” Fabiana Fedeli recently made a presentation at a webinar hosted by Momentum Investments.

Fabiana Fedeli, Global Head of Fundamental Equities at Robeco

www.moneymarketing.co.za 19


Turn static files into dynamic content formats.

Create a flipbook

Articles inside

‘Proposed Reg 28 amendments the opposite of prescription’

3min
page 15

Insurers brace for fresh wave of regulatory reforms

3min
page 46

Now, more than ever, it’s essential to get clients income protection that matches their needs

2min
page 44

Creating jobs and empowering disadvantaged groups

3min
page 42

A retirement revolution

2min
page 40

Africa’s first sustainability-linked bond launched

3min
page 40

Venture capital: a much-needed growth engine in a virus-ravaged economy

7min
pages 38-39

Why including hedge funds in a portfolio enhances returns

3min
page 36

How private market investments offer real benefits for pension fund members

2min
page 36

Blended living annuities – a just choice for retirees

2min
page 33

Retirement planning in a pandemic

2min
page 32

The importance of risk management in the investment process

2min
page 31

The road less travelled

2min
page 30

Truffle – A decade later

2min
page 29

Don’t neglect your nest egg post-retirement

4min
page 28

The essence of being a boutique manager

2min
page 27

The future of investing is human – only smarter and faster

2min
page 26

The fund that turned R1m into R100m

2min
page 24

Strong interest in offshore equity funds

2min
page 20

How do you use tax-free products in your client’s investment portfolio?

3min
page 20

Active opportunities from extreme polarisation in equities

3min
page 19

Asset managers meeting the challenges of the Coronavirus crisis

2min
page 18

New platform helps listed South African companies engage with investors

2min
page 17

Freeing up your time to focus on clients

6min
page 16

Withholding PAYE on salaries of non-tax residents

2min
page 15

Developing your advice business Part 1: Understanding your options for succession

6min
page 14

Sanlam reboots its business through a purposeful brand

4min
page 13

Profile: Sithembiso Garane Head: Listed Credit, Futuregrowth Asset Management

2min
page 10
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.
MoneyMarketing April 2021 by New Media B2B - Issuu