CIO Insights: Four investing paradigms for an era of regime shifts

In a market environment characterised by disruptive trends and possible regime shifts, asset managers need to evolve and to enhance their capabilities to understand, measure and factor these new trends into investment processes.

Potential lower returns and higher risks expected in the future will require investors to move towards a high conviction approach to find the value left in the markets and potential winners in a changing environment. This will also require the further embracing of factor investing to gain exposure to well rewarded risks while avoiding unrewarding ones.

Portfolio construction will also need to adapt to this new environment and to consider multiple scenarios. In doing this, it will be paramount to embrace a flexible approach that goes beyond the traditional boundaries (active vs passive, liquid vs illiquid, benchmark constrained allocations).

In this regard, an ongoing dialogue with investors will be key in order to understand and address their evolving needs. The ability to provide greater transparency, effective tools and services will also be increasingly relevant in order to pursue the best opportunities while mitigating risk.

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