TORONTO, Aug. 19, 2020 /CNW/ – Four types of new habits and perspectives are likely to define the post-COVID-19 era and could impact investment portfolios, according to new analysis from Thinking Ahead, the thought leadership lab at Canada Pension Plan Investment Board (CPP Investments).
In its latest research piece, How COVID-19 is shaping the landscape for long-term investors, professionals at CPP Investments analyzed the breadth of change expected following the global pandemic.
The research found four areas that have the potential to impact investments in the post-pandemic era:
- Permanent changes to consumer behaviour, such as greater ecommerce adoption amongst older consumers.
- Impact on cities and infrastructure resulting from a potential shift of populations away from the largest urban centres and changing mobility trends.
- Shifts in global supply chains benefitting providers of supply chain software and automation.
“As COVID-19 impacts consumers, businesses and governments, we continue to monitor and assess the changing landscape as part of our ongoing risk management efforts, and to identify new investment opportunities,” says Leon Pedersen, Managing Director, Head of Thematic Investing, CPP Investments.
Each focus area is backed by quantitative and qualitative data, including proprietary research such as interviews with portfolio companies and partners, as well as CPP Investments’ custom surveys of consumers and supply chain managers.
An executive summary of this analysis shows that radical changes in behaviours enforced during the lockdown, health and economic concerns, and ongoing political uncertainty were the key drivers of these changes – and that the effects may be long-lasting.
The report was co-authored by Caitlin Walsh, Senior Portfolio Manager, and Ruby Grewal, Portfolio Manager.
CPP Investments continues to think ahead about global issues and trends as we invest for generations. Explore more of our latest insights at cppinvestments.com/thinking-ahead.
About Thinking Ahead by CPP Investments
Thinking Ahead is the thought leadership lab of CPP Investments focused on deep insights in long-term investing. Through words, graphics and videos, Thinking Ahead makes sense of big global issues, as well as identifying emerging trends. We present unique research gathered from the Fund’s position as one of the world’s largest institutional pension investors.
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that invests around the world in the best interests of the more than 20 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments in public equities, private equities, real estate, infrastructure and fixed income are made by CPP Investments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. At June 30, 2020, the Fund totalled $434.4 billion. For more information, please visit www.cppinvestments.com or follow us on LinkedIn, Facebook or Twitter.
SOURCE Canada Pension Plan Investment Board
For further information: Darryl Konynenbelt, Director, Media Relations, T: +1 416 972 8389, [email protected]
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1 Must-Have Investment If You're Worried About a Stock Market Crash – Motley Fool
After a devastating crash earlier this year, the stock market made a stunning recovery in the months that followed.
However, the last few weeks have been rough on the market. The S&P 500, the Dow Jones Industrial Average, and the Nasdaq have all slid into correction territory, each dropping by roughly 10% since early September.
While nobody knows for certain whether a bear market is around the corner or not, it’s wise to prepare for a market crash anyway. And there’s one investment that will give your savings the best shot at recovering from even the worst market downturn: S&P 500 index funds.
S&P 500 index funds boast two major advantages: They provide instant diversification, and they’re extremely likely to bounce back from market downturns. Both of these perks can play in your favor if the market continues its downhill slide.
1. Instant diversification
When you invest in an S&P 500 index fund, you’re actually investing in 500 of the country’s largest companies at once. These organizations have a proven track record of success, making them more likely to survive tough economic times.
In addition, spreading your money across hundreds of different stocks can limit your risk substantially if the market continues to fall. Even if a few companies within the S&P 500 take a nosedive, it won’t cause your entire portfolio to plummet.
Of course, the S&P 500 itself could take a turn for the worse, and the index has already experienced a decline over the last few weeks. However, no matter what the market does, S&P 500 index funds are among the investments most likely to recover from a crash.
2. Almost guaranteed recovery
Nothing is ever guaranteed when it comes to the stock market, but S&P 500 index funds are about as close as you can get to guaranteed recovery after a market crash.
As their name implies, S&P 500 index funds track the S&P 500 — so whatever the S&P 500 does, the index fund will mimic it. Historically, the S&P 500 has always recovered from every downturn it’s ever faced. Even after the Great Recession in 2008, as well as the unprecedented crash earlier this year, the S&P 500 managed to bounce back stronger than ever.
Again, nobody knows whether the current market downturn will get worse in the coming weeks or months, but even if it does, there’s a very good chance the S&P 500 will recover. There will always be ups and downs over the years, but in general, the S&P 500 has experienced a strong upward trend over time. That means even if the market crashes, it’s extremely likely your index funds will recover.
Is it the right time to invest?
S&P 500 index funds are long-term investments, and there’s never necessarily a bad time to invest for the long term. In fact, market downturns are one of the best opportunities to invest, because stock prices are lower, so you can get more for your money.
The key is to make sure you can leave your money alone for years or even decades after you invest. S&P 500 index funds do see positive returns over time, but like any investment, they are subject to volatility in the short term. So to make the most of your money, your best bet is to invest and then sit back and wait.
A market crash may be looming, but that doesn’t have to be a scary thought. By investing in the right places and taking advantage of S&P 500 index funds, you can give your money the best shot possible at surviving a market downturn.
Former blockbuster investment funds fall from grace – Financial Times
Blockbuster funds that previously ranked as the largest in Europe have undergone a spectacular downfall over the past decade.
Former star funds managed by investment groups including Standard Life Aberdeen, BlackRock and Franklin Templeton have shrunk to a fraction of their former size after losing favour with investors as quickly as they earned it.
SLA’s well-known Gars fund, a multi-asset strategy that ranked as Europe’s largest fund as recently as 2017, when it managed a combined €38.6bn, now has just €4.5bn in assets, according to Morningstar, the data provider.
Franklin Templeton’s Global Bond fund, run by veteran fixed income investor Michael Hasenstab, has had a similarly pronounced fall. After dominating the investment industry in 2014, when it had €30.2bn in assets, the fund now stands at just €7.7bn.
BlackRock’s Global Allocation fund has shrunk from €35.8bn to €12bn in just three years, and Carmignac Patrimoine, run by veteran French investor Edouard Carmignac, stands at just €10.8bn, down from €30bn at its peak.
The trend underscores how popular funds’ sharp growth can also lead to their undoing. Investors pile in when managers perform well, but when funds grow to a large size, their returns tend to drop off, resulting in outflows.
“Large funds are vulnerable to boom and bust dynamics,” said Morningstar’s Ali Masarwah, who carried out the research. Not only do giant funds drive up the valuations of the securities they buy, which makes future outperformance more unlikely, they are also less flexible than smaller funds due to liquidity risk considerations, he added.
Just one out of eight former blockbusters analysed by Morningstar beat its benchmark in the period immediately after ranking as Europe’s biggest fund. The data excluded money market funds.
Separate research from data company Broadridge found that only a quarter of the 100 best-selling active funds in Europe continued to attract positive investor flows three years after peaking in size. “Today’s flow winner is tomorrow’s loser,” said Chris Chancellor, senior director at Broadridge.
The findings come after Pimco’s €57bn Income fund lost its place as Europe’s largest fund last month after taking a hit during the market sell-off sparked by the coronavirus pandemic.
Pimco Income now ranks behind Swedish equity fund AP7, which took the top spot after being boosted by the rally in global stock markets during the second quarter.
The Pimco fund’s performance has improved in recent months but investors have not piled back in at the same rate as before the March rout, said Mr Masarwah. He suggested that some investors were diversifying away from the fund because of concerns over its large size.
“Big is not always beautiful,” said Mr Masarwah. “Letting funds grow too large may be in the interests of fund companies but it is not in investors’ interests.”
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