It’s now four years since the launch of Abenomics – a blend of fiscal and monetary policies and structural reforms designed to kick-start the economy, end deflation and boost spending.
We analyse recent developments in Japan as well as the potential risks that remain. In our assessment, Abenomics continues to have a positive impact on the Japanese economy, resulting in an improved outlook for the equity market.
We also discuss how Unigestion’s Japanese equity strategy could help investors exploit the effects of Abenomics while managing forward-looking risks. Our Uni-Global – Equities Japan Fund is overweight in domestic sectors, particularly well placed to benefit from Abenomics in our view. It has delivered significantly better risk-adjusted returns than the broad market since inception (Source: Unigestion, Bloomberg. Annualised net performance of Uni-Global – Equities Japan calculated using actual returns for the SA-JPY share class since inception: March 2006 to June 2017. Past performance is not a guide to future performance).
– We have taken a little risk off the table after a strong run, and as central bank policy shifts.
– We expect market and central bank inflation forecasts to converge, with the year ending on “3-10-60”: US Treasury yields around 3%, a return of 10% from developed equities, and the oil price nudging USD60/bbl.
– Longer term, we remain positive on growth assets, fuelled by low macro volatility and economic growth close to potential.
Since 2014, rising NAVs and record distributions have pushed secondary volumes to over USD 40bn a year and taken average pricing to the highest levels since the financial crisis.
In this short paper, we take the temperature of the large and small ends of the secondaries market in search of areas with the strongest potential for investors.
In an environment where we are seeing a flight to quality at the expense of returns across the market, we identify fund restructurings, secondary directs and the sale of limited partner stakes led by the general partner as the themes with perhaps the most potential for investors at the current time.
By Paul Newsome, Co-Head of Investments, Private Equity and Christiaan Van der Kam, Partner, Private Equity
Alternative risk premia are encountering growing interest from investors. They mimic strategies formerly available through investment in hedge fund vehicles but with more favourable liquidity and cost characteristics.
In this paper, we investigate the question of the allocation across a range of cross-asset alternative risk premia. For this, we design an active macro risk-based framework that aims to exploit varying behaviour in different macro regimes. We then build long-term strategic portfolios across economic regimes, which we dynamically tilt based on point-in-time signals related to regimes nowcasting and current carry. Finally, we perform backtests of the allocation strategy.
Innovation in financial technology has unleashed a digital vortex that promises to transform the asset management value chain, from asset gathering through to investment and operations. We believe this digital vortex offers numerous potential opportunities for asset managers, but it also carries risks. If financial assets are managed by machines which interpret signals in the same way and recommend the same passive investments, how can we avoid crowded trades and the risk of a market stampede? This is where talented humans with forward-looking views will differentiate themselves.
We believe financial technology is best seen as a tool to empower asset managers and benefit clients. Just as athletes use game tapes and data analytics to fine-tune their performance, we envisage a future where new technology allows market participants to undertake accurate and structured analysis to deliver a better outcome to clients. Nevertheless, we are convinced that technology cannot be deterministic. Humans will still be the ones to give it purpose and take the key decisions.
In this short paper we share our thoughts on the direction the industry should take to transcend disruption, and give some examples of how Unigestion is using digital innovation to evolve the way we invest, to the benefit of our clients.
By Fiona Frick, Unigestion CEO