The return to work's impact on fund buying practices; Deciphering the inflation code
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New normals
DFMs, like many in the investment industry, have begun to make their way back to their offices over recent months. But that return remains a piecemeal one – and the increasingly prevalent notion of hybrid working suggests this fragmentary approach will continue for some time yet.
For those forced to conduct manager meetings over Zoom for the past 15 months, the question is how these relationships will evolve in future – and the extent to which fund selection will remain a remote affair.
We’ve discussed the world of video meetings before, and the perceived drawbacks and benefits remain much the same. On the one hand, access is relatively democratised, and fund managers can be more relaxed and open when speaking from home. On the other, it’s harder to pick up visual cues, and some buyers have opted for a safety-first approach of sticking with firms with which they were already familiar.
Future ways of working could bring out the best of both worlds. That’s one implication of the forthcoming FT Discretionary Image Europe 2021 study, which finds that European fund buyers think videoconferencing will remain the dominant method of communication once the pandemic is over – albeit in conjunction with other methods.
In the UK, respondents estimate that 31 per cent of their time interacting with providers will be via video. That’s followed by email contact, at 27 per cent, face to face meetings at 26 per cent, and phone at 16 per cent. It suggests the hybrid model will apply just as much to fund selection practices as it will to working practices in general.
Unfazed
The latest inflation number for markets to get excited about arrived at the end of last week, when the Fed’s preferred measure of inflation hit its highest annual level since 1992.
In the event, however, the excitement failed to materialise. The market reaction was muted, all told, and that’s in keeping with an environment in which – for all the talk – the 10-year US Treasury yield has been anchored around the 1.6 per cent mark for a couple of months now.
This is in part because investors’ inflation expectations are pretty much baked in in the short term. A bigger question, for some, is whether the summer months will produce evidence of a sustained rise.
The narrative could yet shift in the other direction. With certain year-on-year effects set to roll off, and some of the drivers of demand due to come to an end (in the US, at least) – such as extra unemployment protections and the impact of stimulus cheques – short-term measures may soon show signs of peaking.
While the longer-term threat to portfolios remains very real in the eyes of some allocators, this shift in short-term expectations could complicate the picture for wealth portfolios. For more on this topic, look out for Asset Allocator’s next podcast, out next week. And if you missed our previous edition, you can find more details at the top of this newsletter.
Sidelined
Confirmation today that it’s not just unadvised investors who’ve dabbled in cryptocurrencies. Research from BoringMoney published this morning finds that 19 per cent of advised clients also have accounts with D2C platforms – and 9 per cent hold some kind of cryptocurrency assets away from the money placed with their adviser.
Working out the exact amounts involved here is a different task altogether. But whatever the sums, bringing that money in-house – a move advisers and wealth managers might naturally be inclined to investigate – might be more trouble than it’s worth.
For those who can afford it, it’s healthy enough to have a separate pool of assets with which to experiment. Yes, some might see the short-term success of their crypto investments as reason to badger their adviser about the same. But many others will be content to keep their short-term speculation and their long-term investment plans suitably compartmentalised.
