Why ESG Factors Matter in Asia Credit Investing Integrating ESG factors can help manage downside risk and identify high‑quality businesses driving positive change. Already mainstream in Europe, responsible investing is fast becoming a key consideration in Asia as well. The integration
The MSCI World Value index is a well-known proxy for the performance of value stocks. The index relies on three value factors (earnings-forward-to-price and dividend yields) and five growth factors to allocate to stocks. The stocks in the …
Foundations of a cycle-driven approach to asset allocation Countercyclical Investing
A distinctive approach to investing Capital Group has been investing around the globe for more than 60 years. Its unique multiple-portfolio manager approach, The Capital SystemSM, sets it apart from many other global asset managers. Rob Lovelace – who is
Strong economic data over the last week in the US, Europe and Asia appears to be confirming the perception among investors that a cyclical recovery is well established. As a result, valuations of risk assets have risen on the view that the pandemic will be overcome this year.
Barometer: Laat de rally doorgaan April 2021 Ruime monetaire en fiscale stimulansen zouden de economie en de bedrijfswinsten een sterke duw in de rug moeten geven. Daarom blijven we de voorkeur geven aan cyclische aandelen. De wereldeconomie kent een sterke
Just when we thought we could stop hunkering down in our interconnected yet improvised offices (sometimes carved out from a children’s bedroom), a third pandemic wave has come upon us. Moreover, inflation worries have suddenly emerged.
The return of volatility to China markets. China’s equity markets have been roiled by a combination of concerns in recent weeks, culminating in the fallout from the Archegos family office liquidations in late March. However, this volatility has retraced …
The past decade has seen the use of multi-factor investing in corporate bonds increase significantly. Easier access to corporate bond data along and a growing body of research has enabled managers to develop robust factor-based …
Environmental changes throughout the remainder of the 21st century will undoubtedly influence economic trends. Both physical and transition climate change risks have potential consequences for long-term investors. However, precise estimates of these risks are not available. To assess the top-down,
Stocks extended gains in March as countries pushed ahead with their COVID-19 vaccine rollouts, the US passed a new stimulus package and major central banks indicated they are likely to keep interest rates low even as the economy rebounds. The
In 50 years of factor investing, there have been a series of love/hate phases with regard to the use of factors in selecting stocks for portfolios. At present, 2019-2020 seems likely to go down in history as a period of aversion, much like 2009-2011 and 1998-2000. These are the periods when most of the conventional factor combinations used by portfolio managers did not perform.
In this research piece, we demonstrate the value of the Axioma Worldwide Equity Linked Factor Risk Model (WWLM4-MH or ‘Global Linked Model’) for solving two very common analytical problems when managing global portfolios. Global equity mandates are often broken into
Als we dieper ingaan op vastrentende waarden uit opkomende markten ontdekken we variatie in spreiding, zowel over landen als over kapitaalstructuur.
The role of cryptocurrencies as a vehicle for speculation has been well established. However, it is less clear if cryptocurrencies can also serve to manage risk. The authors seek to determine the diversification potential of cryptocurrencies both for short and
Over the past decade, multi-factor investing in corporate bonds has seen significant development. Easier access to better datasets along with an extensive body of research has enabled managers to move the dial significantly. Investors can now access robust factor-based strategies offering diversification benefits in corporate debt allocations.
We have sold Tesla from our Global Sustainable Equity portfolios, having held the shares since early 2019. This sale follows a downgrade in our internal sustainability ranking.
The current backdrop poses the question, what are the best defensive strategies for a fixed income investor to pursue in a reflationary environment? As Figure 1 shows, a meaningful bond sell-off during a phase of quantitative easing (QE) is not unusual, largely because QE is ….
In deze dekkingsgraadscan vindt u meer informatie over de dekkingsgraad van een gemiddeld Nederlands pensioenfonds. We geven een overzicht van de ontwikkeling van de feitelijke en (12-maands) voortschrijdend gemiddelde dekkingsgraad in …
De uitbreiding van de digitale economie doet de vraag naar datacenters toenemen, maar baart ook zorgen over hun energieverbruik. De oplossing voor dit probleem is een aantrekkelijke belegging in groen vastgoed.
Asian equities peaked twice in the first quarter amid optimism over the recovery in China, the prospect of improved relations between the new US administration and China, and the arrival of COVID-19 vaccines. Zhikai Chen, head of Asian equities, argues the outlook for much of the region remains positive, even after a valuation-related stumble.
Last March many would have thought that with at least three major pharmas rolling out their vaccines, nine months later the crisis would be winding down. Unfortunately, a combination of underestimated virus contagion and overestimated vaccine distribution makes it look like 2021, at least through the first half, will be a continuation of 2020.
Over the last few weeks, we have seen a rise in bond yields alongside an outperformance in global value stocks relative to growth stocks. While we at GMO have certainly been happy to see some recovery in value stocks (and we are confident that this recovery has much further to run), the moves have only reinforced a narrative that has been gaining ground in …
In its meeting last week, the Bank of Japan (BoJ) announced several changes in its monetary policy framework, but also confirmed its policy to keep yields under control. While other government bond markets have seen quite some volatility in the …
Rembrandt’s masterpiece “The Night Watch” is the inspiration for a multidisciplinary research process at Capital Group. Everyone in the painting is looking in a different direction and it is this gathering of multiple perspectives that summarises our approach to gaining a deeper understanding of market disruptions, assessing the risks and evaluating the opportunities that arise during times of extreme crisis.
Valuations of risk assets have marked a pause in the face of a number of headwinds. In our view, valuations remain underpinned by ample central bank liquidity and the prospect, in the US, of further fiscal stimulus.
Technology has brought the world some wonderful benefits – and some wonderful investments. Technology has allowed many professional workers to continue their jobs from their homes during the current pandemic. President Biden conducted a significant portion of his election campaign from his basement. Yet we must be aware in any new technology that unintended consequences can arise.
Asian equities rode high early in the year amid optimism over the recovery in China, the new US administration and improved relations with China, and the advent of vaccines. The outlook for investor flows into much of the region remains positive, even after a recent valuation-related setback. Zhikai Chen, head of Asian equities, discusses the prospects for the asset class this year.
China’s success in quickly getting its economy back on track in the wake of the coronavirus will be studied closely by other regions hoping to achieve the same. The eurozone in particular, which faces the possibility of extended lockdowns as the European Union (EU) struggles with its …
President Joe Biden signed the $1.9tn American Recovery Plan into law this month, adding to the $0.9tn stimulus in late 2020. Debate is turning to the next bill on longer-term infrastructure, clean infrastructure and inequality measures …
6.45pm, 15 March 2021 – this is my appointment for a first dose of the Covid vaccine. I don’t want to give away my age, but by then approaching 25 million people will have received their first vaccine dose in the UK – close to half the adult population. I don’t know which vaccine I will get, but either way we are on our way. The grand reopening is coming.
COVID-19 will leave an indelible scar on people and businesses which will take time to heal. While optimism mounts as global vaccination gets underway and spring shoots of recovery break through, the ever-present challenges that loom large on the …
Rising global bond yields and interest rate volatility have been dominant themes in fixed income markets so far this year. In our latest investment team meetings, we discussed how likely these trends are to continue—and the potential implications for bond markets and central bank policies if they do.
There’s only one sure way to identify an asset bubble, and that’s after the bubble has burst. Until then, a fast-appreciating asset may seem overvalued, only for its price to keep rising. Anyone who has tried to breathe one last breath into a balloon and finds it can accommodate …
Growth, employment, consumption, renewable energy…These are all indicators that reflect the rapid rise of the ‘blue economy’ and its growing contribution to business and industry, better living standards and the development of a more responsible global economy.
These are promising times for emerging markets (EM) debt, as we see a number of macro factors aligning in a broad tail wind for the sector. EM economic growth is leading the global recovery, yet EM is the only major sector with broadly attractive valuations. In developed markets, while rates have backed up from their extreme lows at the start of the year, monetary policies continue to anchor core …
Core government bond yields were lower and curves were flatter after a volatile week which, at one point, saw US and Europe diverge with US treasuries bear steepening while European government bonds experienced a bull flattening on Wednesday. Markets were caught between inflation concerns …
There is no universal approach to identifying value stocks or measuring their performance. Using various measures of a company’s fundamental value and picking value stocks by comparing them to sector peers would have boosted investment performance over the last decade. However, this style would still have lagged as value stocks kept getting cheaper and expensive stocks dearer.
Corporate debt is the fastest‑growing area of hard currency emerging markets (EM) debt, with almost USD 2.5 trillion outstanding and new issuance averaging 15% of debt outstanding per year since 2011. The asset class generated strong risk‑adjusted returns over the five years ended December 31, 2020, due to the …
A compelling investment opportunity: Japanese equities offer attractively priced and more visible earnings growth for 2021 and beyond. Nevertheless, Japanese equities are currently trading at a discount to global equities. And Japan equity markets have outpaced major developed market equities both in 2020 and year-to-date in 2021 as the world seeks to transition to a post-pandemic recovery.
The proliferation of crypto-currencies (CCs) and the popularity of these assets among investors has led us to question their nature, function, valuation and potential development. CCs are at the crossroads of technological innovation, finance and monetary policy.
When Covid-19 hit, many producers cut back production and drew down inventories as demand collapsed and the economic outlook was highly uncertain. While demand from cyclical end markets was hit hard, other end markets like …
The benefits of diversifying across a multitude of smart beta equity factors have been supported and explained in a host of research and literature1 . Single-factor indices (quality, value, momentum, low volatility, and small size) may reward market participants over the long term, but can be notoriously difficult to time over the shorter term. Multi-factor indices, on …
The sell-off in US Treasury bonds reversed over the last week with the 10-year bond yield dropping from its intraday high of 1.75% on 18 March. The decline was driven principally by falling real yields as inflation expectations were mostly stable. There was also a reversal in the recent outperformance of value stocks relative to growth stocks.
Everyone knows the value strategy has been a grave disappointment out-of-sample since, say, 1990 (thirty years!). Even Fama and French know it. 2 And everyone knows the value strategy has been quite bad for the last 10+ years with the 2018–2020 period essentially a crash. Well, that’s all kind of true. But, as odd as this might sound, the realized …
The National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPCC) closed in Beijing on March 11th. This is the most important event on China’s political calendar, as the NPC approves the main policy objectives that will set the tone for the remainder of the year. This year was especially important, as it also …
Asia’s emergence as the world’s key engine of growth has been one of the most compelling investment stories in recent times. The newly launched Capital Group Asian Horizon Fund (LUX) (CGAH)1 is designed to tap into this attractive opportunity set and, in this Q&A, portfolio manager Christopher Thomsen explains why …
Eliminating carbon dioxide emissions over the coming decades will require multi-billion dollar investments, as well as a wide range of efforts to reduce energy consumption, increase efficiency, electrify and decarbonise processes, and nurture alternative fuels to economic viability.
Meeting Paris Agreement climate change targets means tackling the harder-to-decarbonise areas of the economy with technologies that don’t yet exist at scale. There is no silver bullet to tackling climate change. It’s likely the answer to getting to net-zero emissions by mid-century is to deploy everything we have, but faster. 2050 is the target date for net zero that the Intergovernmental Panel on Climate Change (IPCC) says[1] is what’s needed …
Big markets have a special allure for investors. They offer the promise of another Apple, Google, or Microsoft. But big markets also bring with them the threat of what Cornell and Damodaran (2020) call “the big market delusion.” Big market delusions generally begin with …
