Those changes were having an impact on the performance of markets prior to the pandemic, but the Covid-19 crisis has arguably sped up that shift.
Peter Fitzgerald, multi-asset investor at Aviva Investors, says one likely impact of the pandemic will be an increase in spending on renewable and energy efficiency.
By contrast, the “obvious losers” in the coming years will include companies such as airlines, where a cultural shift which extends beyond the fall out from the crisis has taken place.
"We wonder if in a post Covid-19 world, consumers may look to how companies behaved during the pandemic and this may factor into their purchasing decisions.--David CoombsHe adds that clients should also be wary that a trade conflict between the US and China escalates in the years ahead - something he says would be very negative for traditional technology companies, and for many emerging market assets.
In such a climate, the US dollar and also Japanese assets are likely to perform well, he predicts, as they typically do so in times of market strife.
Wayne Berry, investment manager at Brewin Dolphin, says he has placed client capital into the Scottish Mortgage investment trust.
He says: “The managers are focused on the very long-term trends out there, and have a very strong track record in performance terms over many years.”
Adapting to rapid change
David Coombs, multi-asset fund manager at Rathbones, says: “Among the clearest impacts of the Covid-19 pandemic is the rate at which structural trends and changes that were already underway, for example the move to online retailing or businesses moving to use cloud services, have accelerated.
"To future proof a multi-asset portfolio we have to be aware of these changes, and we have to question every company we own about how they intend to make sure they are the right side of them.
"These accelerated changes mean that businesses need to be thinking about new distribution channels, maybe direct to consumer rather than third party distributors, or new digital strategies that require the support of consultancy businesses to evolve the way they operate.”
He adds: "We wonder if in a post Covid-19 world, consumers may look to how companies behaved during the pandemic and this may factor into their purchasing decisions.Those who were seen to be treating customers or staff poorly, and there have been many examples of this unfortunately, could easily find that they have turned many consumers off their brand. This is equally forming part of the evaluation we are making about businesses we own.”
If we have seen the peak of globalisation and are about to see an increase in localism, that would be very inflationary.--Bertie DannattAway from technological considerations, Clark Fenton, portfolio manager at RWC, says one consideration clients should bear in mind for the future is that inflation rises.
He says: “Even if inflation rises a little, it is probably the case that central banks will allow that rather than intervene, because if they intervene, there is a risk that it would harm the economic recovery.
Globalisation vs localisation
"In that scenario, the inflation would be persistent. And it is likely that one of the outcomes of the pandemic is that firms want to reverse the globalisation trend by bringing supply chains and manufacturing closer to home. That is inflationary over the long-term.”
While many investors have been reassured by the way that government bonds performed during the crisis, others think that could prove something of a last hurrah.
Bertie Dannatt, investment director at Ruffer says: “Over the past forty years we have had low inflation entrenched in the economies and markets, and many people expect that to continue.
A focus on ESG considerations gives the portfolio manager a perception of a broader range of risks that could impact that company or industry, when compared with just reviewing traditional financial metrics.--Dean Cheeseman"But I think what they are missing is the huge increase in government spending, coming alongside the monetary stimulus, could lead to a very significant increase in inflation.
"If we have seen the peak of globalisation and are about to see an increase in localism, that would be very inflationary. To prepare for this, we have invested in gold, and inflation-linked bonds. We do not see a role for conventional government bonds in portfolios for a long time to come.”
ESG growth
Inevitably, ESG considerations have also continued to rise up the agenda. This is largely in response to changing behaviours, and ESG shares' relatively resilient performance during the current crisis has not gone unnoticed.
Dean Cheeseman, multi-asset investor at Janus Henderson, says: “Investors will also have to increasingly pay attention to some of the megatrends that are reshaping our industry, such as ESG considerations that will likely be at the forefront of the investment process going forward.
"Incorporating ESG criteria will mean that portfolios will favour investing in businesses that have better governance, make a positive societal impact and provide innovative solutions to address environmental challenges, or are at least on the transition path to do so.
"A focus on ESG considerations gives the portfolio manager a perception of a broader range of risks that could impact that company or industry, when compared with just reviewing traditional financial metrics.”
Segmentation is also becoming more important. Mark Jackson, investment specialist on the multi-asset team at JPMorgan Asset Management, says the products on which he works now divide the market into 14 asset classes, from the previous five, as they search for greater diversification.
Keith Balmer, multi-asset investor at BMO GAM, notes many UK investors are heavily exposed to the UK economy and stock market in their portfolios, an allocation he feels is not justified by the outlook for the UK economy and for many of the companies listed in the UK.
This is because the UK market is replete with companies most likely to suffer from disruption and a shift in investor sentiment, such as oil companies, mining companies, banks and traditional retailers.
