Portfolio Construction Forum

The top 20 stocks comprise 63% of the ASX200, and the index is heavily skewed towards banks (20.9%) and iron ore miners (14.8%). Given the expected negative growth in the banking sector and the vulnerability of iron ore prices due to a weak demand outlook, Australian equity markets could well be anchored by the 'dinosaur seven'. With inflation at a two-year low but still well above the RBA's target rate of 2% to 3% and rate cuts still uncertain, the outlook for Australian equity markets continues to look volatile. Investors seeking diversification, reduced volatility, and higher unique alpha over the long term should explore opportunities beyond the ASX20, focusing instead on the Ex-20 index. This index provides exposure to Australia's future rather than its past and is forecast to have 7.8% EPS growth pa over the next three years. - Dion Hershan, Yarra Capital Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

It's the year of the vote. A record-breaking 40-plus countries - some two billion people (more than 40% of the world's population) representing over 60% of global GDP - will hold national elections in 2024, more in a single year than ever before. Yet authoritarianism and illiberal ideas are on the march globally, driven by the rise of strongman autocrats such as Vladimir Putin and Xi Jinping, and identity politics in the West. In such an environment, deglobalisation of the world economy, which accelerated during the Covid-19 pandemic, seems set to continue, exacerbated by supply chain challenges that echo past lessons unlearned. In the context of a challenging environment for liberal democratic societies, investors must understand the geopolitical, social and economic forces influencing the outlook for investment markets. This panel session features three investment experts, each offering and debating a high conviction thesis on a long-term, deep rooted structural change impacting markets over a decade or more - Oliver Hartwich, Chris Rogers and Vikram Mansharamani. Earn 1.00 CE/CPD hrs on Portfolio Construction Forum

The COVID pandemic was a natural disaster, yet the two-pronged stimulus response of monetary and fiscal policies was designed for an economic crisis worse than the GFC. The combination of the pandemic and the policy response resulted in a surge in economic and inflation volatility from 2020 to 2023. We are now entering a new phase where this economic cycle will mean revert to a traditional business cycle - a cycle that may not exactly repeat but will rhyme with prior inflation cycles. Opportunities exist in global bonds in 2024 and 2025 no matter hard or soft landing outcomes – including US Treasuries, US Agency MBS passthroughs and select local currency emerging market bonds in Latin America. - Jack McIntyre, Brandywine Global.  Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

With Australia's residential vacancy rate at a record low and net overseas migration at a record high, it has never been more apparent that Australia needs a long-term housing solution to help expand supply. With rigorous capital provisioning models placed upon major banks following the GFC, the banks can no longer participate in the market like they used to, providing greater opportunity for real estate private credit lenders to fill the gap. This all combines to help generate attractive risk-adjusted returns for investors in the asset class. - Mark Power, Qualitas. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

- Jonathan Pain, The Pain Report. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

There's no such thing as "normal" for supply chains. The challenges for 2024 and 2025 that have echoes in the past include logistics network disruptions, geopolitical risks and the cash costs of environmental policies. That makes investing in supply chain security more important than ever. However, there's evidence that firms are scaling back spending on two of the three most important resilience-building measures. Companies' under-investment in supply chain resilience doom them to repeat past disruption failings. - Chris Rogers, S&P Global Market Intelligence. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Second term presidents tend to be more ideologically aggressive, since they are freed from the need to face voters again. At a minimum, a Trump 2.0 administration would likely boost traditional energy, defence, and financial services, among other sectors which would benefit from lighter regulation. Meanwhile, Trump's "America First" trade policies could be inflationary and further increase US tensions with China, given Trump's promise to revoke China's Most Favored Nation trade status it has enjoyed since 2001. Investors globally need to think through the implications of a second term for either candidate. - Libby Cantrill, PIMCO. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

There's much to learn from history, but every time is different when it comes to markets. Inflation in the 2020s has been very unlike that of the 1970s. The inevitable recession that did not occur was likely prevented by unprecedented fiscal stimulus. Going forward, short-term interest rates will likely fall, but long-term rates might rise. Equities are unlikely to revisit the frothy heights of 2021 and market breadth should widen. As cyclical inflation subsides, structural price pressures driven by reglobalisation and the energy transition will collide with the deflationary force of AI. The backdrop for investing will require investors to identify how the outlook today intersects with our experiences of the past and where it differs. This time is different because every time is different. - Ronald Temple, Lazard. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

What a difference a year makes. In February 2023, investors were preoccupied by the risks of rising inflation, monetary tightening and recession. This year, the focus is on disinflation, monetary easing and economic growth. The US economy remains resilient, and the Federal Reserve will likely ease policy in 2024 as inflation declines. The European Central Bank will also cut rates, boosting eurozone growth in the second half of the year. The outlook is more challenging in China, where the economy remains hindered by structural problems in the property sector. However, the generally bullish macro backdrop favours equities over fixed income. Portfolio construction practitioners should not let heightened geopolitical risks cloud what is otherwise a positive outlook for markets. - Ronald Temple, Lazard on Portfolio Construction Forum

Investors spend too much time trying to predict the future, using history as their guide. Instead, they should focus on what is actually happening in the world, and think differently about portfolio construction. Much of current economic and markets thinking is rooted in the post-Global Financial Crisis era. Practitioners need to let go of that history and instead embrace the fact that four trends – weak population growth, deglobalisation, the end of "free money", and the decoupling of asset prices from economies – are fundamentally changing the long-term outlook for markets. - Wayne Fitzgibbon, CAS Market Insights on Portfolio Construction Forum

Changes in central bank thinking, higher inflation volatility, and a reversal of the global savings glut are creating an investment environment like that of the pre-Global Financial Crisis period – in which interest rates remain higher for longer and central banks make more frequent policy adjustments, to keep inflation under control. In such an environment, bonds will offer higher levels of both income and diversification, within a multi-asset portfolio. - Chris Iggo, AXA Investment Managers. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Contrary to wide opinion, globalisation is not "history" but is being reinvented. Since 2010, rising Chinese nationalism, the Covid pandemic, and Russia's invasion of Ukraine helped bring an end to 30 years of hyper-globalisation. Weaponised interdependence and the derisking of global supply chains mean location matters again. Rather than relying on highly-efficient global supply chains, governments and firms must now carefully consider how they source resources and goods – whether it's energy, semiconductors or electric vehicles – as well as risks and vulnerabilities in the US dollar financial system. For investors, a less interconnected world has significant implications for corporate capital expenditure and country allocation. - Kevin Hebner, Epoch Investment Partners. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

When seeking exposure to the energy transition, investors typically think of wind and solar farms, and hydrogen and battery production. However, elevated interest rates increase the costs of such projects, reducing their future investment returns. By looking more deeply down the value chain, with a focus on earnings and value, the best risk/reward energy transition opportunities can be found in sectors which at first seem counterintuitive, including fossil fuel production and mining. - Brian Arcese, Foord Asset Management on Portfolio Construction Forum

As risks related to over-indebted governments, the Russia-Ukraine war and Brexit fuel instability in Europe, the opportunity set for private credit investors is growing. While many people think that investing in challenging deals, complex capital structures and distressed situations is too difficult or too risky, unravelling the complexity of European private credit can unlock attractive risk-adjusted returns. - Fabian Chrobog, NorthWall Capital on Portfolio Construction Forum

In most cases of macro forecasting, historical evidence (data) is and must be the starting point for arriving at a forecast. The fundamental problem with contemporary economics is that historical evidence is not only its starting point, but also its terminus. Why has economics become so data-driven? Underlying today's historicist bias was a very important theory that permeated economics in the 1970-2000 period. This was the theory of Rational Expectations developed largely at the University of Chicago under the influence of Professors Sargent and Lucas. They wanted an absolutely rigorous (mathematical) theory on which market analysis could be based. Given the mathematical difficulties in creating their theory, they had to introduce an innocent-sounding axiom widely known as "Rational Expectations". This assumption was tantamount to saying that the dynamics of the economy were "stationary". This is the statistical term for saying that its dynamics and underlying relationships do not change over time. This in turn says that the correlations unearthed via data analysis will never change. All this implied that there was absolutely no reason for investors to doubt the conclusions based upon historical data for the best theory available said that structural changes in effect did not exist. But the fact that structural changes do exist and that historical data are often of limited relevance presents a major opportunity for investors seeking to outperform others. We can develop superior inferences about the future by using historical data as a starting point, and then incorporating new theories as to how ongoing structural changes will alter forecasts based upon historical data. To arrive at superior macro forecasts, these theories must be causal in nature. Unless they are causal, they cannot explain why historically-based theories will fall short. Another way of saying this is that investors seeking higher returns from better forecasts must think their way to such forecasts. - Dr Woody Brock, SED on Portfolio Construction Forum

The Investing Roundtable explored key challenges and opportunities in multi-asset, multi-manager portfolio construction that practitioners should be thinking about, given they can do anything, but not everything! Our research analysts each articulated a challenge or opportunity related to researching and identifying quality investment management solutions that they believe portfolio construction practitioners should be thinking about when building quality multi-asset, multi-manager portfolios:  If you do anything, consider an allocation to global small cap equities; If you do anything, use returns-based style analysis; and, Don't generalise, it's time to optimise portfolios. - Bronwen Moncrieff, John Laver, Michael Furey and Naomi Finnigan. Earn 0.75 CE/CPD hrs on Portfolio Construction Forum

Why does our industry exist, why do we as industry professionals get up in the morning, how often do you speak with your clients, what about the actual end-client? As professionals we need to stand with our clients and share our voice to ensure risk-aware approaches – and the ability to provide security to our clients' investment journeys – remains part of our investment landscape. We must whole-heartedly embrace risk AND return multi-asset portfolio construction. - Anthony Golowenko, MLC Asset Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Private Equity funds are impressive and have great marketing. It would be great if we could "invest in everything", but that is not feasible. Fund selection has massive alpha potential, but it is hard, and only ever investing in top quartile funds over time is virtually impossible. Private Equity pooled returns (weighted average) have historically been attractive, while also less volatile than investing in a single fund or fund-of-funds. A lower cost, efficient and scalable approach to investing, effectively allowing investors to "buy the private market" would be easier and better. An investible index of private market funds would deliver this and complement investors' portfolios in many ways, just like in public markets. - Edward Talmor-Gera, NewVest. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

The unique characteristics of private debt make it ideal for any portfolio. It is a versatile asset class that fits in either the defensive or growth component of an investment strategy – or even both at the same time. It can provide a strong hedge against inflation, increase a portfolio's total return and decrease overall risk. Funds that hold lower risk positions in senior secured or investment grade debt may be a suitable alternative to traditional bonds. Alternatively, funds with exposure to sub-investment grade debt or alternative parts of the capital structure can replace part of an allocation to equities. Either way, private debt's low correlation with other asset classes means it really can give investors just about everything across a full economic cycle. - Andrew Lockhart, Metrics Credit Partners. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

While global markets in 2023 have been led by a narrow group of mega-cap stocks, global small caps may be rewarded by the markets going forward supported by faster expected earnings growth and compelling valuations relative to large cap equities. The size and dynamism of the universe allows managers to identify a broad array of small cap companies across geographies and industries with improving company fundamentals and scope for multiple expansion. Stock selection and prudent portfolio diversification, however, are critical as investing in small caps translates to both greater opportunity and risk. - Trevor Gurwich, American Century Investments. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Every day, every one of us is touched by infrastructure and, the longer we live, the more billions of us there are, and the more we need infrastructure. Driven by a number of macro themes, over the next 17 years to 2040, experts predict we need to invest US$94 trillion in infrastructure just to keep pace with our human needs. This investment has benefits to people and communities everywhere. Demand for essential infrastructure offers opportunities for investors to generate a steady reliable income with inflation protection built in and includes mitigants to a rising interest rate environment. In today's world of uncertainty and volatility, one thing that is certain is the ‘essential' role infrastructure plays in investment portfolios. If you do anything, include infrastructure in portfolios. - Michael Bessell, Dexus. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

The transition a net zero emission economy offers risks and opportunities for investors. Investors are increasingly seeking to invest in the resource companies and manufacturers whose products are required to enable the world to transition to cleaner energy sources while avoiding businesses with high emissions, due to concerns about asset stranding risk. Infrastructure companies provide access to energy, water and transport - as they always have done - and are generally not viewed as exciting energy transition opportunities. Furthermore, infrastructure screens as high emissions. However, infrastructure sectors are major beneficiaries of the transition and concerns about asset stranding risk are misplaced. Infrastructure is a simple way to benefit from the transition to a net zero emission economy and represents a multi-decade growth opportunity. - Gerald Stack, Magellan Asset Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

We are living in the middle of a major societal shift towards not just the usage of, but the reliance, dependence and advancement of our lives being built on technology that seeks to emulate us, mimic us and envelope us. We often talk about human invention through the lens of the industrial revolutions - the first, mechanisation through steam and coal; the second, automation and mass production through electricity; and, the third, computer, automation and systems of record/engagement. We are in a new revolution, the fourth age, systems of intelligence and the AI revolution. - Tidal Ventures' Grant McCarthy and Microsoft's Shane Baldacchino. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

AI has been described as a lever for detaching economic growth from population growth – as important as the steam engine. AI is the latest tool in a wave of disruption that is rolling through all global industries, at a pace that is quickening. Companies that don't use the cutting-edge tools – like AI - to remake their business, as did Amazon, Netflix and eventually Disney, simply don't have a place in today's portfolios, whether index or not, because technology is slashing their useful lives, causing them to derate and increasing their cost of capital. - Alex Pollak, Loftus Peak. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Further weakening of the global economy continues to be likely with geopolitical, policy and banking sector pressures and the elevated probability of recession in coming quarters. Sitting on the sidelines with cash, however, comes at opportunity costs to investors with current yields at a decade high. The role of bonds in a portfolio can aid in pursuing investor goals or stabilising a portfolio to be more resilient when economic shocks hit markets, however, many investors would benefit from evaluating whether their bond holdings are meeting these goals. Investment-grade corporate bonds offers an important ballast towards overall asset allocation and can improve portfolio risk-adjusted returns. A focus on the highest quality securities will provide opportunities for investors to capture future income, as well as add a defensive anchor within portfolios. - Jeremy Cunningham, Capital Group. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Emerging Market (EM) equities continue to trade at significant discounts to those in Developed Markets (DM). With structural demographic tailwinds, years of relatively progressive interest rate policies and major progress on the ESG front, most EM economies (at least those with a reliable rule of law) are well placed to deliver positive outcomes for investors. Today, many of the leading companies servicing those economies have superior earnings growth to their DM peers with many trading even cheaper than at the height of the Covid market turmoil. Are valuation driven investors breaching their own defensible investment philosophy by not holding a standalone exposure to EM equities? - Ross Cameron, Northcape Capital. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Warren Buffett famously said, "in the short run the stock market is a voting machine but in the long run it is a weighing machine" - what gets weighed are fundamentals, specifically earnings. Brokers hire a great many analysts to write and publish detailed analysis on corporate earnings forecasts. These individual forecasts are combined to create consensus median estimates on what a company is expected to earn in 12 months' time. It's right to focus on earnings, but the level of delivered growth is less important than the surprise in growth, the amount by which a company beats or disappoints relative to expectations. Equity factors focused on fundamentals deliver better outcomes - and given the uncertainty in the current environment, the Quality and Low Volatility factors can capture better earnings surprise when the overall market disappoints, providing protection in an equity allocation. - Ram Rasaratnam, AXA Investment Managers. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

The market and economic backdrop is making diversification in a global equity allocation difficult. Market cap indices are narrower than any time in history, as the market and active managers flock to the mega caps perceived as logical winners from the AI revolution. As markets become narrow and expensive, core, growth and quality portfolios are converging. This presents risks for many portfolios but a great opportunity for valuation-focused investors. While headline multiples are demanding, there remains opportunities in predictable earnings and forecastable cashflow generators that are being overlooked. As valuation and concentration risks rise, doing nothing is no longer an option, particularly when not everything carries the same risks. - Warryn Robertson, Lazard Asset Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Many financial commentators have suggested that the strong growth of the non‐bank corporate lending market is a short‐term, cyclical trend that could threaten the stability of our financial system. The growth of the non‐bank market can be explained by a long‐term structural shift toward private capital as banks and public markets have transitioned from serving small and medium‐sized companies to larger companies over the past several decades. For investors, private credit presents an attractive opportunity to add diversification and attractive risk-adjusted returns to portfolios. Characteristics such as yield premium over comparable liquid markets, control, upfront economics and low historical volatility and default rates all make this asset class one to consider for a core allocation in investors' portfolios. - Teiki Benveniste, Ares Australia Management. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Private markets have long been shrouded in mystery. Many people hold strong opinions about them, but these opinions are often not rooted in facts - due in part to the fact that data on private markets has been scarce, making it difficult to assess true performance. But data is available - and it debunks some of the most common misconceptions about private markets. In fact, the data shows that private markets not only demonstrate more resilience than traded assets during downturns, private equity has also historically beaten public markets, besting liquid equities over most 10-year time periods. Private equity can represent a target-rich environment, the market potential of which studies show is larger compared to publicly traded companies. In all, private markets should not be overlooked by investors. - Hamilton Lane's Mario Giannini. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Traditional performance attribution helps explain past fund performance but is not predictive of future success. In the same way that Moneyball has swept every professional sport, data science is bringing greater transparency into portfolio managers' decision-making skill. Decision attribution, which analyses the buy and sell decisions of individual portfolio managers, helps identify patterns of demonstrated skill - and specific areas for improvement. For portfolio construction practitioners seeking to select managers capable of outperforming, behavioural analysis of fund managers is crucial. - Essentia Analytics' Clare Flynn Levy and Langdon Equity Partners' Greg Dean. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Three gigantic, global, interconnected risks have the potential to upend the world as we know it. The rapid acceleration of artificial intelligence, the escalating US-China war and the ways in which it has the potential to catalyse massively disruptive developments in the weeks and months ahead, creating ripples that will impact our world for decades, and challenges to the US dollar's reserve currency status will define the geopolitical, technological, and economic landscape in coming decades. Yet each risk is accompanied by tremendous opportunity. Investors who understand a wide range of potential outcomes for ambiguous developments will be better positioned to successfully navigate the uncertainty plaguing our world. - Vikram Mansharamani, Visiting Fellow at Portfolio Construction Forum. Earn 0.75 CE/CPD hrs on Portfolio Construction Forum

The young are better able to navigate volatility, uncertainty, complexity and ambiguity, owing to their natural growth and learning mindset. In an environment where investors can do anything, just not everything, we can all benefit from adopting a youth mindset. Young people own their values, are passionate in their activism, use empathy to understand the world, and seek clarity and choices that allow them to be agile and adaptable. Practitioners can incorporate these lessons to successfully navigate a VUCA world, and build better quality multi-asset, multi-manager portfolios for their clients. - Tassos Stassopoulos, Trinetra Investment Management. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Artificial intelligence will revolutionise our lives, in positive and negative ways. Yet the current generation of large language models suffers many of the long-standing problems associated with AI, while “general” artificial intelligence remains a distant prospect. As such, investors should beware the lofty multiples assigned to AI-related stocks. We are in a replay of the dotcom bubble, with a blend of loose financial conditions and hype surrounding a new technology. The AI mania has further to run but it will be ended by additional Federal Reserve tightening, in response to stickier-than-expected US inflation. - Dominique Dwor-Frecaut, Macro Hive s on Portfolio Construction Forum

The world has undergone a structural shift from the prior lower for longer regime to an environment of higher (but falling) inflation, higher volatility, and significantly higher interest rates. A shift of this magnitude demands an asset allocation response from investors, and looking in the rear-view mirror for directions is misguided. Instead, investors must consider which assets repriced first to reflect this new regime and which are still playing catch up. At a time when "you can do anything", there are meaningful implications and opportunities for portfolio rebalancing and those investors still structurally underweight bonds need to put aside recency bias and "do something" now. - Rob Mead, PIMCO. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Markets have undergone a regime shift - and practitioners and investors must change the way they think. To prosper in this regime, we need to embrace the Quantity Theory of Money, appreciate that the US and China are engaged in an economic war, and recognise changes that are occurring in national economies – all of which affect global currencies. Understanding these factors will be crucial to building multi-asset portfolios capable of delivering financial wellbeing in the years ahead. - Professor Steve Hanke, Johns Hopkins University. Earn 0.50 CE/CPD hrs on Portfolio Construction Forum

Since the GFC in 2008, the world has delivered the perfect storm for equity returns, but central bank pump priming has now ended and equities are no longer the reliable investment partner many have come to love and know. Even through this perfect equity storm, high yield bond returns have been reliably similar to equities but with contractual income and much lower dispersion. Advances in trading technology have created liquidity in the higher yield segment allowing their compelling risk/return benefits to be unlocked. Achieving equity like returns with much lower risk and equivalent liquidity is the holy grail that is now on offer from high yield... an investment partner like no other! - Paul Benson, Insight Investment. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Beyond a near-term sluggish outlook for global growth, practitioners should think about three key forces which will drive long-term market risks and opportunities. The energy transition will disrupt economies for decades, while generative AI will affect businesses ranging from fast food chains to healthcare providers. Meanwhile, geopolitical tensions have significant implications for the profitability of multinationals. Shorter term, practitioners should prepare for sluggish global growth in 2024, driven by weak US and European consumer sentiment, and by real estate and youth unemployment challenges in China. - Ronald Temple, Lazard on Portfolio Construction Forum

Since central banks abandoned their ultra-loose monetary policies, the macro landscape has become increasingly divergent, with greater dispersion across interest rates, economic growth, and inflation. As a result, currencies once again offer a source of investment returns, as well as portfolio diversification. Managed futures strategies allow practitioners to exploit tactical opportunities in this highly liquid asset class, in a systematic way. - Razvan Remsing, Aspect Capital. Earn 1.00 CE/CPD hrs on Portfolio Construction Forum

Fiona Ker, Ruffer. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Not all "quality" is the same. Being narrowly focused on either Growth or Value styles can lead to a volatile return profile. Quality can be found in both cyclical and defensive companies. ESG is a key component of quality and a material contributor to client outcomes. Company engagement is a superior approach than divestment when considering ESG in an Australian equities portfolio. Where there is no clear path to a satisfactory ESG profile, excluding a company for investment is the only way to ensure responsible capital allocation. Protecting capital in down markets is the foundation for superior returns – and quality investing, with a long-term investment horizon, protects shareholder wealth on the downside, while capturing steady capital growth. - Craig McCourtie, Northcape Capital on Portfolio Construction Forum

Since the end of the Second World War, the US dollar's reserve currency status has supported liquidity and efficiency in the global financial system. From a US perspective, dollar dominance brings additional benefits, reducing borrowing costs and import prices, allowing domestic consumers to enhance their living standards. While the US dollar's share of global foreign exchange reserves is in long-term decline, governments around the world continue to view America as reliable and stable, ensuring that the currency's dominance will continue. - Dr Woody Brock. Earn 1.00 CE/CPD hrs on Portfolio Construction Forum

Aggressive central bank tightening raised bond yields and increased the risk of recession in 2023. As economies slow, fixed income will once again provide portfolio diversification, allowing practitioners to focus on capturing long-term trends such as climate change and artificial intelligence. Renewable energy, electric vehicles, hydrogen fuel and carbon capture offer attractive ways to play the theme of climate change. And while technology stocks may be overpriced, AI promises significant long-term productivity benefits across a range of sectors, including healthcare, marketing, and finance. - Chris Iggo, AXA Investment Managers. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum

Regime identification is critical to successful portfolio construction strategy. The asset management industry has operated in a disinflationary world for 40 years - a world where capital takes the spoils. If labour is to become more dominant, what does that mean for asset allocation? As we move into an era which is both more inflationary and more volatile, asset allocators will need to adapt in order to deliver returns. There will be significant opportunities to do so - but a different set of tools will be required. Correlations that have held firm in a low inflation, falling interest rate environment will become unstable, testing traditional portfolio theory. A dynamic and unconstrained approach to asset allocation will become essential. - Fiona Ker, Ruffer. Earn 0.25 CE/CPD hrs on Portfolio Construction Forum