Financial intermediaries and wealth managers must navigate myriad market challenges every year. We see five areas we think demand attention for 2024.
Our 2024 Themes and opportunities paper calls the years ahead an “An Age of Agility.” It highlights the fact that the next 12 months abound with unknowns, that it’s essential to be wary of unrewarded risks and that everyone should keep in mind Alexander Pope’s message that “only fools rush in where angels fear to tread.”
The global investment landscape is undergoing a profound transformation. The once disinflationary effects of globalisation are waning, and the world is leaning increasingly toward factionalization and friend shoring. Issues such as resource nationalism, the possibility of “greenflation” due to energy transitions and emerging inflationary pressures highlight this transformation. The past trend of reduced labour costs due to automation and outsourcing is being replaced by challenges that include rising commodity prices and the potentially negative implications of AI.
With higher interest rates and tighter financial conditions, the spotlight is on alternative capital sources, favouring private lenders. Moreover, as the global community becomes increasingly aware of growing environmental crises and nature-related risks, investment strategies are evolving. The recent framework from the Taskforce for Nature-related Disclosures (TNFD) hints at the dawn of regulatory changes in this space.
In this report, we look at a notable development — the flattening of the global efficient frontier. In this area, there have been changes in the expected returns for the risk taken on, which have significantly changed the outlook for several asset classes. We therefore set out the ways in which advisers and their clients can enhance their resilience and adaptability. We also look at how they can strategically shape and position their portfolios to flourish in this shifting investment environment.
We emphasise the importance of a strategic asset allocation review that incorporates structural trends and addresses emerging risks. Such reviews enable portfolios to stay focused on long-term goals amid the noise of short-term fluctuations. We also provide insights on accelerating capital deployment within a multi-sleeve private markets programme — a way to target asymmetric alpha in a world of dispersion and dislocation.