In interviews with sovereign wealth funds, pension companies and asset managers in Asia and Europe who collectively manage around $ 3.4 trillion, one thing was clear: many of them are avoiding the overheating of the market. scholarship holder.
The most common perspective was that of caution. They are aware that the rebound in markets and private company valuations is largely due to extremely low interest rates, massive central bank stimulus measures and government budget support, some of which may start to decline in the near future. months to come.
With asset values still seen as inflated, even in some hot fields like healthcare and tech, many are waiting for a second potential downturn after stimulus ends, but before mass vaccinations kick in savings. restart without risking widespread infection.
Here’s what they had to say:
Convenience Stores, Pipelines
GIC Pte, Singapore’s sovereign wealth fund, is looking into “less loved” areas from retail to infrastructure, whose ratings have been crushed by the pandemic, CEO Lim Chow Kiat said when the company released its report annual end of July.
The fund doesn’t officially disclose that it manages more than $ 100 billion, but has more than $ 450 billion, according to the Sovereign Wealth Fund Institute, making it the sixth largest in the world.
In two of its biggest deals this year, it was part of a group that acquired a 49% stake in ADNOC Gas Pipelines for $ 10.1 billion, and last month partnered with Australian real estate group Charter Hall in a 682 million Australian dollars ($ 500 million) acquisition of more than 200 convenience stores attached to gas stations.
CIO Jeffrey Jaensubhakij said even areas such as hospitality could rebound before global travel resumes. “Once you contain the virus, domestic travel can come back even though international travel cannot,” he said. “Then there could be opportunities in the hotel space where domestic travel could continue to grow and take up a good deal of demand.”
Supply chain change
Global border closures can only be temporary and trade is slowly recovering, says Didier Borowski, head of global views at Amundi SA, Europe’s largest asset manager overseeing the equivalent of around $ 1.9 trillion. dollars.
However, he predicts that the pharmaceutical and healthcare industries will relocate production of some key products to avoid being dependent on a country. But even then, Borowski says it would be too expensive and unprofitable to bring everything home.
“This is the end of unbridled globalization, not the end of globalization,” he said in an interview earlier this month.
With travel restrictions limiting vacation plans, so-called staycations are back on the agenda, says Will James, deputy director of European equities at Standard Life Aberdeen Plc, whose team manages the equivalent of about $ 11 billion.
He invested in Thule Group AB, the Swedish manufacturer of bicycle racks and roof racks for cars, whose shares have almost doubled since the end of March.
“Rather than going to the beach overseas, people stay at home to drive across the country,” he said in an interview late last month.
Aviation stocks like Airbus SE could “make a very aggressive recovery” if a vaccine is found, but he warns that it’s still unclear whether the world will ever go back to the way things were, even if it works.
Bonds, automatic bonds
Bonds are one of the big unloved assets of the Covid crisis, says Andrew McCaffery, global CIO of Fidelity International, which manages around $ 437 billion.
Bonds from automakers are particularly attractive as auto production picks up and more people drive to avoid congested public transport, he said in an interview earlier this month.
“If you look at credit spreads, they’ve reached levels that make the bonds of some global automakers relatively attractive,” he said, citing Ford Motor Co. and Nissan Motor Co. as examples. “These obligations are not appreciated, especially when you consider that there has been an increase in car use compared to public transport. “
During the pandemic sell off and rebound, AustralianSuper, the country’s largest pension fund with the equivalent of around $ 133 billion, kept more than half of its Australian and global equity portfolio and reduced its real estate, credit and private equity holdings.
Now he is looking for investments in digital, transport and social infrastructure as governments make the most of savings, IOC Mark Delaney said last week. The company is also looking for other renewable energy opportunities, like the $ 300 million deal last year with Quinbrook Infrastructure Partners, as governments consider a green rebound.
“It is clear that doing more around the environment will be a very good result in the long term,” he said. “Since governments are prepared to spend more and be more proactive on the economy, they are likely to be much more proactive on the environment as well.”
With a mandate to maximize long-term returns, the Australian sovereign wealth fund is keeping its powder dry, CEO Raphael Arndt said during his annual portfolio update earlier this month. The $ 118 billion fund is positioned cautiously, with no pressure to deploy its liquidity “unless and until opportunities present themselves,” he said.
“Economies around the world are in their worst recessions in many, many decades, and if you look at asset prices, they haven’t moved much,” he said. “The question investors need to ask themselves is: It only makes sense if interest rates stay very close to zero and the stimulus measures stay for a long, long time – and there must be risks. That’s why we think we are much better placed with caution at this time. “
With public markets overvalued, Aware Super CIO Damian Graham is embarking on direct investments, such as data centers and apartment buildings. The $ 91 billion fund is also selling some of the assets it says will struggle, like office buildings and malls, as people change the way they work and shop, he said. he said in an interview last month.
The Sydney-based fund last week invested 100 million euros ($ 118 million) with APG Group NV to build serviced apartments in Europe – a deal that could rise to 500 million euros. It is also a bidding war for listed fiber optic operator OptiComm Ltd.
While China was the first to be hit by the coronavirus, it is now leading the way, making it an attractive proposition for Singapore state investor Temasek Holdings Pte.
The company, which oversees the equivalent of about $ 225 billion, is positive on several key themes in China, including consumer tech, life sciences, biotechnology and fintech, said the chief strategist of China. Rohit Sipahimalan investments during the company’s annual review earlier this month.
“This year, China is likely to be the only major economy to experience positive GDP growth,” he said.
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