The global investing landscape is poised to shift over the next decade, thanks to the largest U.S. generation: millennials.
As the longest-running bull market enters its 11th year, some portfolio managers are advising clients to stay invested in stocks because a series of trends, including an aging population, smart technology and automation, should further fuel returns in coming years.
Millennials, people born between 1981 and 1996, will be approaching age 50 in 2030, while the tail end of baby boomers will reach retirement age. By 2025, millennials are projected to comprise roughly 75% of the workforce.
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Baby boomers and the so-called silent generation that preceded them control about 77% of wealth, according to Fundstrat Global Advisors’ analysis of the most recent Federal Reserve Survey of Consumer Finances. But that is about to change. By 2030, millennials will hold five times as much wealth as they have today and are expected to inherit over $68 trillion from their predecessors, according to a study by Coldwell Banker Global Luxury.
That demographic shift, economists say, is expected to help boost U.S. economic growth and credit demand as more young adults buy big-ticket items like houses and cars. That will also reshape industries they’re closely aligned with, including technology, e-commerce and social media, they said.
“Economic expansions don’t die of old age,” says Larry Adam, chief investment officer for the private client group at Raymond James. “But I do think it’s going to get more challenging over the next decade.”
The 2020s won’t be all about Big Tech
High-growth technology companies including the popular FAANG stocks – Facebook, Amazon, Apple, Netflix and Google parent Alphabet – have propelled the decade long bull market. Investors, however, have now opted for beaten-down value stocks like energy and financial sectors that have underperformed the broader market in recent years.
Although tech shares aren’t expected to repeat their performance over the past decade, some experts continue to favor them over the long term because of the far-reaching impact they have on other industries.
“The technology sector continues to reinvent itself,” Adam says. “Every sector has some form of technology.”
Investors who are searching for other parts of the market to potentially deliver above-average growth in the coming years should look to stocks that have exposure to sustainable investing, digital transformation and genetic therapies, analysts at UBS said.
Emerging markets come back in favor
Emerging market assets, which have been pummeled in recent years by fears of slowing global growth, are expected to come back in favor as population growth rises and de-escalating trade tensions.
Demographics are expected to be a significant driver of growth across many economies. Investors are betting on growth potential in India, as the economy is on track to overtake China as the world’s most populous country by 2027, according to the United Nations.
Meanwhile, Vietnam, one of Asia’s fastest-growing economies, has been a haven for U.S. multinationals looking to shield themselves from the U.S.-China tariff spat.
“There’s huge growth potential in Asia,” says Rich Sega, global chief investment strategist at asset manager Conning. “The geopolitical stress in Hong Kong has opened up opportunities for other areas in the region for Vietnam, Thailand and Singapore.”
Don’t count out U.S. stocks
To be sure, economists are optimistic about domestic growth and don’t foresee a recession within the next year. Economists project a 35% chance that the U.S. economy will enter a downturn between now and the November presidential election, according to Bankrate’s Fourth-Quarter Economic Indicator survey. That’s down from 41% from the prior quarter.
Some analysts believe this economic expansion and record run still has legs.
“U.S. stocks will surprise investors,” says Thomas Lee, managing partner and head of research at Fundstrat Global Advisors. “Too many people are betting on a bounce-back in emerging markets.”
Sanctions-hit Huawei ramps up investment in Chinese tech sector
SHANGHAI (Reuters) – Huawei Technologies has built up stakes in Chinese semiconductor companies and other tech businesses as the world’s largest telecoms equipment maker bolsters its supply chain in the face of pressure from the United States.
Habo Investments, set up by Huawei in April 2019, has closed 17 deals for stakes in Chinese tech companies since August last year, public records show.
The investment arm was established in response to what Huawei’s rotating chairman, Guo Ping, last week described as “suppression” by the United States after escalating restrictions that have cut off Huawei’s supplies of many overseas chips and effectively barred it from building its own.
“Since Huawei is only one company, we use investment and technology to help our supply chain partners become mature,” he said.
The company has emerged as a focal point in deteriorating U.S.-China relations with President Donald Trump’s administration alleging that its equipment could be used by Beijing for spying, which the Chinese company has denied repeatedly.
Huawei’s investment push also coincides with ramped-up government efforts to boost China’s semiconductor sector, which still lags behind leading chip producers including the United States, South Korea and Taiwan.
While the investments might help Huawei in the future, analysts say they have done little so far to address the supply chain gaps that are undermining its once-booming smartphone business and could eventually threaten its core network equipment operations.
“It will take a long time,” said one Chinese chip investor. “But they don’t have many good options, so they must turn to investing outside.”
Huawei declined to comment on the investment division’s operations.
Most of Habo Investment’s deals have been in chip-related Chinese start-ups, a few of which have become part of Huawei’s supply chain.
Vertilite, which was founded in 2015 and received an investment from Huawei this year, makes VCSEL sensors that support facial-recognition technology in cameras.
The company did not respond immediately to a request for comment, but one Vertilite investor said its sensors are used in a number of Huawei handsets.
However, many of the businesses Huawei has backed are at an early stage in their development.
“Most of these companies are small, niche players who are good at what they do, but they are not necessarily globally competitive,” said Ivan Platonov, who tracks China’s chip sector at research company EqualOcean.
Shoulder Electronics, for example, makes RF filters that enable wireless communications but has yet to achieve compatibility for advanced 5G phones.
A spokesman for the company, which received investment from Habo in January, could not be reached outside business hours on Monday.
3Peak, which also received investment from Habo this year, makes analogue-to-digital converters (ADC) used in wireless network base stations.
U.S. players dominate that market segment and 3Peak generated only 300 million yuan ($43.99 million) in revenue last year, according to a prospectus it issued before listing on Shanghai’s STAR market.
3Peak did not respond immediately to an emailed request for comment.
Habo’s portfolio also includes companies outside Huawei’s core telecoms operations. Several investments in chips, raw materials and battery technology companies point to ambitions in self-driving cars.
Late last month it also closed an investment in Open Source China, a Shenzhen-based business behind Gitee, a Chinese rival to U.S. coding platform GitHub.
Gitee did not respond immediately to an emailed request for comment.
Habo typically acquires stakes of 5-10%, filings show, though valuations have not been disclosed.
CHANGE OF PACE
The recent investments mark a change in pace and tactics for Huawei, ramping up the frequency of such deals and refocusing on domestic businesses rather than overseas companies.
In 2013, for example, Huawei acquired Ghent-based photonics company Calopia. The following year it purchased Neul, a British maker of chips for the internet-of-things sector.
“Huawei likes to do its own R&D. So investment or acquisition was done only as a last resort, and that was why it tended to be towards U.S. or European technology companies,” said one former Huawei staffer who helped to scout acquisition targets.
Reporting by Josh Horwitz; Editing by Jonathan Weber and David Goodman
Source: – Reuters Canada
Railpen's new investment chief on transformation, governance and culture – Top1000funds.com
Michelle Ostermann, managing director of investments at Railpen which manages £30 billion in assets for the Railways Pension Schemes in the UK, discusses the pension fund’s continued evolution.
In this Fiduciary Investors Series podcast Amanda White talks to Michelle about the organisational change at Railpen – including more assets in-house, a new investment decision making framework, and an increased allocation to private assets – the importance of culture, and the intimate relationship between the fiduciary management and investment teams.
About Michelle Ostermann
Michelle Ostermann is responsible for the overall management and continuing development of the Railway Pension Scheme’s investment management capability. Her primary focus is to ensure it attracts and retains the best possible talent to achieve the long-term investment goals.She joined Railpen in January 2019 as chief fiduciary officer and was appointed managing director in December 2019. She has 25 years’ experience in the investment, insurance and pension industries. She joined Railpen from British Columbia Investment Management Corporation where she was senior vice president responsible for investment risk, strategy, research, and corporate relations. She has a Bachelor of Science degree in Economics and holds a Chartered Financial Analyst designation.
About Amanda White
Amanda White is responsible for the content across all Conexus Financial’s institutional media and events. In addition to being the editor of Top1000funds.com, she is responsible for directing the global bi-annual Fiduciary Investors Symposium which challenges global investors on investment best practice and aims to place the responsibilities of investors in wider societal, and political contexts. She holds a Bachelor of Economics and a Masters of Art in Journalism and has been an investment journalist for more than 25 years. She is currently a fellow in the Finance Leaders Fellowship at the Aspen Institute. The two-year program seeks to develop the next generation of responsible, community-spirited leaders in the global finance industry.
What is the Fiduciary Investors series?
The much-loved events, the Fiduciary Investors Symposiums, act as an advocate for fiduciary capitalism and the power of asset owners to change the nature of the investment industry, including addressing principal/agent and fee problems, stabilising financial markets, and directing capital for the betterment of society and the environment. Like the event series, the podcast series, tackles the challenges long-term investors face in an environment of disruption, and asks investors to think differently about how they make decisions and allocate capital.
Chinese authorities revamp foreign investment rules – Pensions & Investments
Chinese authorities will integrate separate investment quotas for foreign institutional investors as they continue to open up the market, starting Nov. 1.
The China Securities Regulatory Commission, People’s Bank of China and State Administration of Foreign Exchange set out Sept. 25 measures for the administration of domestic securities and futures investment by qualifying institutional investors. The new rules revise the country’s qualified foreign institutional investor program, launched in 2002 and the renminbi qualified foreign institutional investor program, launched in 2011. The two quotas, covering mainland stocks and bonds, were removed last year.
The revisions relax the qualification requirements and aim to facilitate investment by QFIIs and RQFIIs by streamlining application documents, and shortening and simplifying the review process by authorities.
The CSRC also published its provisions on issues concerning the implementation of the measures for the administration of domestic securities and futures investment by QFIIs and RQFIIs.
Other moves by authorities include expanding the asset types that QFIIs and RQFIIs may invest in to include private investment funds, financial futures, commodity futures and securities listed on the National Equities Exchange and Quotations market — an over-the-counter market for public securities that are not listed on the Shenzhen or Shanghai stock exchanges. These investors may also participate in securities lending and bond repurchase transactions.
Financial derivatives contracts and related trading models will be gradually relaxed for QFIIs and RQFIIs “in an orderly manner, which is to be announced by the CSRC upon agreement with the PBC and the SAFE,” an announcement said.
The authorities said supervision has also been enhanced.
“Going forward, the CSRC will stay committed to market liberalization and accelerate the two-way opening up of Chinese domestic capital markets at a higher level,” the announcement said.
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