BOSTON and LONDON, March 10, 2017 /PRNewswire/ -- Partners Capital, the Outsourced Investment Office acting for endowments and foundations and ultra-high-net-worth families in Europe, North America and Asia, today released to its clients Insights 2017, its 185-page report capturing the firm's analysis of the major factors influencing investment returns and opportunities, and the investment initiatives it is taking on behalf of clients in view of that outlook.
Stan Miranda, Co-Founder and CEO of Partners Capital, which today manages assets of more than $18 billion, said, "As we roll forward into 2017 and beyond, it is clear to us that we are at the start of a shifting 'global order' which is critical to understand as the macro context for investors. The great monetary policy experiment is coming to an end. A pause in globalization and the re-emergence of protectionism, dirigisme and mercantilism have become evident around the world."
Partners Capital's new analysis has considered that context and reaffirmed that returns expected by long term multi-asset-class investors, including endowments and foundations, will be significantly lower than what those institutional investors typically earned in the past.
Specifically, Partners Capital continues to forecast expected overall long-term "endowment-style portfolio" average nominal net returns of 6.7%, a decline from expected returns of 9.5% just after the global financial crisis in 2009. This expectation reflects expectations for slower real economic growth in the coming decades due to declining labour and productivity trends, as well as scope for a pause in globalization trends due to popular support for protectionism. However, rising inflation and more targetted fiscal stimulus will help to offset some of those drags.
"We expect that these forces will create a more fertile environment for the most skillful active managers, as they can turn to identifying who will benefit or suffer from the big policy shifts of protectionism, deregulation and lower taxes," said Mr. Miranda.
Partners Capital has identified several major investment themes for client portfolios in response to this expected investment environment:
- Prepare for inflation
Although a reflationary environment should be supportive of equities and risk assets, top line growth may be offset by rising wage pressures and valuations. Accordingly, the firm is adding to the most inflation-protective asset classes including inflation-linked bonds and equity sectors which are most resilient to inflation or even benefit from it.
- Find alternative safety net assets
To balance the positioning for reflation, we recommend enlarging safety net allocations for rebalancing and tactical investment opportunities in a combination of liquid absolute return strategies, short-duration credit, U.S. dollar, gold and tail-hedging overlays.
- Exploit opportunities where technology is being used to systematize alpha generation
Technology is being harnessed to systematize the research-based generation of investment insights at lower costs than the previous high-cost labor-intensive fundamental research methods. Smart beta and hedge fund replication strategies deliver lower cost solutions to investors, while algorithm-based quantitative managers give a differentiated source of alpha from human managers who are prone to crowding and consensus.
- Enlarge the menu of alternative alternatives and make allocations meaningful
Given increased competition and valuations in most asset classes, the firm continues to look "off the beaten path" for return streams tied to unique risks that are not related to economic growth. The return drivers of these strategies are typically structural and quantifiable, such as insurance risk or human longevity risk, rather than a pure reliance on manager skill.
- Focus on true value-added investors
Partners Capital continues to focus on private markets given the greater prospects of manager alpha, based in unique sourcing capabilities, sector specialists where there are clear barriers to entry, and managers that can bring meaningful operational performance improvements. The firm maintains its conviction in private debt with its contractual returns at a significant premium to liquid credit strategies.
- Focus on domestic investment themes
Anti-globalization or protectionist policies are already on the upswing and Partners Capital expects domestic oriented firms to outperform their more internationally integrated counterparts.
- Drive portfolios to optimal cost efficiency
The firm continues the "war on fees" and its focus on more cost-effective means to deliver returns through new low-cost strategies or successful negotiations for more aligned fee structures with its existing managers.
Partners Capital sees some combination of the above strategies and its current lineup of exceptional asset managers continuing to contribute 2% or higher average annual outperformance over a full market cycle (10 years).
About Partners Capital
Founded in 2001, Partners Capital is a wholly independent Outsourced Investment Office (OCIO) primarily serving sophisticated institutions and senior investment professionals in Europe, North America and Asia. With offices in Boston, New York, London, Singapore and Hong Kong, the firm is one of the few truly global OCIOs, employing 125 people worldwide and covering all major asset classes. The firm manages assets of more than $18 billion. Its institutional clients include 11 Oxford and Cambridge Colleges, Eton College, the Research Foundation for the State of New York's University System, the Royal Academy of Arts, Milton Academy, the New York University School of Law School and the Cancer Research Institute. Additional information on Partners Capital may be found at www.partners-cap.com.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/partners-capitals-new-insights-2017-report-identifies-major-factors-that-will-influence-investment-returns-and-opportunities-in-2017-and-beyond-300421904.html
SOURCE Partners Capital