Supplements » Global Industry 2020

New York roundtable: Saying no to the ESG naysayers

In a nation where ESG is regarded sceptically, a pushback has taken place against attitudes and rules that hinder ESG’s progress. Our US panel discusses this and other topics, such as how US-Sino relations impact business.

New_York_roundtable_Dec_2020

Matt Coldren (executive vice president, financial institutions group, Natixis Investment Managers)
Jan van Eck (chief executive, VanEck)
Greg Ehret (chief executive, PineBridge Investments)
Richard Garland (managing director, global adviser, Ninety One)
Lisa Jones (head of the Americas and US chief executive, Amundi Pioneer)

Funds Europe – How are asset allocations changing due to the Covid-19 pandemic and its economic aftermath?

Lisa Jones, Amundi – What’s not changed for our clients is their spending policy, their target rate of return, and their liabilities for the pensioners that they must meet. Yet we find ourselves in a low interest rate environment. These low rates are really forcing institutional investors and advisers to make decisions: ‘Do I take on more risk by going out longer-duration or lower-quality? Do I sacrifice liquidity for illiquidity? How do I think about generating the kind of income levels that we really do need?’

Greg Ehret, PineBridge – There are different reactions from different types of clients. There are a number that were really opportunistic that would try and take advantage of the dislocation – particularly in credit. There are other clients, for example endowments, that were so heavily invested in illiquid assets that they thought about their liquidity profile and started to think about how they could raise cash.

Today, people are getting back to normality in the sense that they’re looking at their overall long-term asset allocation.

Richard Garland, Ninety One – The biggest challenge our clients face is what to do with their fixed income allocation. You’ve got negative yields in many parts of the world in developed markets. It’s no longer seen as a safe haven and the concern is whether interest rates could rise.

What we’ve seen is that people are looking at EMD [emerging markets debt]. In particular, we have seen a huge increase in interest and flows into our EM credit strategies from both institutional and retail clients.

On the equity side, all roads lead to Asia and China – and we’ve also seen interest in Chinese fixed income. Lastly, I’ve seen a lot of clients going to cash, they’ve been buying our money market fund, getting no return, and that’s making them nervous. We have also had strong flows from financial advisers into our Gold Equity Fund.

Matt Coldren, Natixis – We see our investors still favouring the US. We think that a lot of the volatility right now is coming from increased case counts in Covid and whether there are going to be more restrictions on mobility, which would then obviously soften economic output if that was the case. We don’t think like we’re back in March, though. We know more about the virus, how to handle it, and how to contain it. The only other thing that we’re seeing people think about going into next year is liquid alternatives. But our base allocation is still very much favoured towards large-cap US equities and not so much on the small and mid-size.

Jan van Eck, VanEck – China’s response to this whole crisis economically has been radically different to the rest of the world: their interest rates went up significantly, which is what makes them attractive. But the fact that they allowed interest rates to rise in the beginning of the summer is a dramatic statement about their confidence. From the ETF point of view, it’s made Chinese bonds attractive and they’ve come into the indices.