Institutional Asset Manager Newsletter 08.11.24

Good news for bitcoin but expect volatility

As the world digests the news that Donald Trump has been victorious in his bid to become 47th President of the United States, the markets brace for volatility.
Initial responses were positive, especially for bitcoin, the US dollar and American companies likely to benefit from favourable domestic policies.
A recent Quilter Investors survey of some of the world’s largest asset managers, revealed that a Trump presidency was seen as "mildly positive" for markets, compared to no change for a Kamala Harris administration.
However, Lindsay James, Investment Strategist at Quilter, says over the long-term, volatility is likely to be the defining feature of this presidency.
"Widespread tariffs will now likely be implemented, choking global trade in the meantime, while the deficit is likely to grow ever larger, at a time when markets are getting a little nervous about the sheer scale of spending," he says.
And Trump’s victory will be bad news for sustainable investing advocates who will no doubt remember that he dismantled more than 100 environmental policies and regulations during his previous presidency.
Trump maintains that "climate change is a hoax", reaffirming his long-held position as a climate sceptic, while analysis from Carbon Brief published earlier this year predicts that a second Trump term could result in the US emitting an additional four billion tonnes of carbon dioxide equivalent by 2030 compared to Democratic party’s proposed plans.
This undoubtedly has major implications for those investors with ESG strategies, especially those aligned with targets to be net zero by 2050.
However, James warns investors not to get distracted by the election result noting: "With the future of Ukraine now in the balance, and geopolitical risks seemingly increasing every day, investors will be best placed to try to block out the noise, remain invested and base their decisions on the fundamentals of corporate America, instead of the measures enacted out of the White House."
Stepping away from the election, we bring you research that shows institutional investors do not always practice what they preach.
A report from consultancy bfinance finds that while asset owners claim to consider diversity, equity and inclusion (DEI) as a critical deciding factor when choosing an investment manager, in reality such virtues are rarely material.
Despite more than a third (36 per cent) of investors telling bfinance that they would be unlikely to hire an external manager that lacks gender and ethnic diversity, 78 per cent of asset owners deemed diversity as irrelevant when searching for an investment provider. Just 14 per cent believed DEI to be significant and 8 per cent treated it as relevant.
These findings may appear to let the asset management industry, which is struggling to implement effective DEI policies, off the hook. If potential investors do not consider diversity important, why bother taking it seriously?
But businesses with a diverse workforce are proven to be more effective and have better performance. Data from WTW show that investment teams in the top quartile of gender diversity outperform the bottom quartile by 45 basis points per annum in terms of net excess returns.
As bfinance notes, there are myriad benefits to improving DEI and it is time the asset management industry took advantage of them.

Gill Wadsworth, Editor, Institutional Asset Manager
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