This time last year we were looking back at a year characterised by volatile markets, excessive political involvement, low economic growth and real concern about the risk of sovereign defaults. Looking forward now we think policy easing will continue to improve global financial conditions, we are more positive than we have been on equities, relative to bonds, based on higher expected real earnings growth. We think institutional investors will continue to diversify into alternatives, while selectively exploring the increasing number of smart beta strategies in the market. These are among some encouraging signs but we believe any sustained global economic recovery is likely to remain fragile.
In this issue of Global Investment Matters we cover a wide range of topics, including how investors can use smart beta to generate respectable net-of-fee returns over the long term and how the demand for low-risk matching assets is driving index-linked gilt demand. We also explore the history and outlook for real interest rates, as well as the growing degree to which the world’s largest investment managers are undertaking considerably greater levels of engagement with portfolio companies.