Institutional Asset Manager Newsletter 27.01.23

Kiss of life for emerging markets, UK mulls post-Brexit regulatory rethink, and investor tentacles wrap around affordable housing

Welcome to the latest IAM newsletter where emerging equities are back on the investment radar with economists predicting opportunities arising from China’s move to a less stringent Covid policy.
Rob Brewis, investment manager at Aubrey Capital Management, tells us that the strict lockdown measures imposed by the Chinese government had "sucked the life out of the economy" but financial resuscitation was set to revive the entire region.
"We invest in the Chinese consumer: will he/she be released to spend the massive savings hoarded up in the past few years? We believe so, and this will be a much more favourable backdrop for our consumer companies who are now very cheaply valued," Brewis says.
Good news for investors desperate to counter the impact of double-digit inflation. Jeremy Leach, chief executive officer of Managing Partners Group, says investors are doing "everything they can in the search for yield including increasing their appetite for risk through investing in equities".
Back in the UK, IAM’s managing editor Beverly Chandler talks to Joshua Maxey, co-founder of Third Bridge, about what the possibility of a return to pre-MiFID II regulations means for equity research providers.
Maxey highlights the irony of Bank of England chief Andrew Bailey dismantling the work he had so carefully constructed when head of the Financial Conduct Authority which was a driving force in MiFID II’s creation.
Andrew Bailey, now Governor of the Bank of England, but head of the FCA at the time, and his team were the architects of most of the research regulation within MiFID II.
"It’s interesting and political," Maxey says. "MiFID II is what the UK wanted at the time."
Maxey warns of a potential fall out for the sellside of any regulatory reversion - pointing to possible redundancies from investment banks with Goldman Sachs already cutting headcount.
The UK’s housing crisis is in the sights of Octopus Investments which this week launched a GBP200-300 Affordable Housing strategy for institutional investors.
With the government’s GBP21 billion programme to build more affordable housing in England falling short by as many as 32,000 homes, Octopus’s input seems sorely needed.
Jack Burnham, Head of Affordable Housing, Octopus Real Estate, says "With Housing Associations searching for alternative funding routes for their development pipelines in the face of net zero costs and increased cost of debt, and Local Authorities aiming to move back into large scale social housing provision, there is a real need for trusted partners and private capital to step up."
But given concerns about the standards of new homes being built countrywide, Burnham promises the properties funded by the strategy will be built to "high quality and robust sustainability standards".
"It’s really important to us that the homes we’ll be funding aren’t just affordable at the outset, but affordable throughout their use – we’re not looking to provide a quick fix and walk away."
Gill Wadsworth, Editor

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