More than a hundred financial professionals from the Latin America and U.S. Offshore community gathered in Houston, Texas May 15-17, to take part in Natixis Investment Managers’ 2024 Investment Forum. With a central theme of taking on smart risk for a world in flux, attendees learned firsthand from economists, portfolio managers, global macro strategists, research specialists, and a former NASA astronaut guest speaker, strategies for adapting to succeed. Philippe Setbon, CEO Natixis Investment Managers, kicked off the event by highlighting the growing complexity in the asset management industry. This environment he believes will increase demand for a diversified solutions-oriented active manager.
Knowing financial professionals have a lot of factors to contend with, from lingering high inflation and interest rates, to escalating geopolitical tensions, and the Magnificent 7’s market runup, Sophie del Campo, Executive Managing Director, Southern Europe, Latam & U.S. Offshore, Natixis Investment Managers, said providing them with direct access to unique insights, ideas, and solutions is imperative. “We believe it is more critical than ever to take on smart risk – and to rely on in-depth research and portfolio analysis to rationalize every investment decision,” said del Campo.
To support this, investment experts from DNCA, Loomis Sayles, Harris Associates, Mirova, Ossiam, Vaughan Nelson, Thematics, WCM, and Natixis IM Solutions – all part of Natixis’ global asset management network – engaged with attendees on ways to build more resilient, risk-efficient portfolios. Active participation was further promoted via a panel hosted by Natixis Investment Managers Global Head of Client Sustainable Investing Laura Kaliszewski, who interviewed two industry-leading clients on methods for implementing sustainability in their investment process.
How might inflation, rates and growth impact portfolios?
Jack Janasiewicz, Lead Portfolio Strategist and Portfolio Manager with Natixis Investment Managers Solutions – U.S., and Mabrouk Chetouane, Head of Global Market Strategy for Natixis Investment Managers Solutions – International, expect inflation to drift lower, major central banks to commence interest rate cuts, and slower growth. But depending on the region there will be measurable differences.
“As inflation continues to come down in 2024 this will allow the U.S. Federal Reserve to cut rates. Maybe in September or December. And hikes are done,” said Janasiewicz. In Europe, inflation remains sticky, with wage increases, especially in Germany, continuing to feed inflation, according to Chetouane. Energy prices are also inflationary for this region which imports most of its energy. Having already signaled a 25-basis point rate cut in June, Chetouane expects another one in the fall from the ECB. “At the beginning of the year, the market was expecting six rate cuts from the ECB, that is now down to two cuts,” said Chetouane.
They believe Latin America should benefit from U.S. growth. Also, central banks in the region have demonstrated their ability to manage the inflation cycle coming out of the pandemic. The U.S. economy is fairly robust and that should flow over into Mexico and Latin America markets,” said Janasiewicz. Also, U.S. corporate earnings remained healthy for the Q1 earnings season, with the final tally approaching nearly 6% growth for the quarter.
With this backdrop, Janasiewicz favors equities with a tilt to U.S. stocks and market weight International Developed. Large caps and SMID within U.S. equities, especially in quality cyclical value, are attractive to him. Also, he thinks lower rates may lead to down-in-cap participation with SMID playing catch-up later in the year. Chetouane also sees areas of value in Europe and small cap opportunities.
Asset allocation trends: Anything but cash
Cash redeployment is a big theme with investors in 2024, says James Beaumont, Head of Natixis Investment Managers Solutions. His Portfolio Clarity team, which analyzes advisors’ portfolios for asset allocation trends, has tracked a sizeable flow from money markets back into stocks and bonds. “Many investors missed the rally and are looking for opportunities. Fixed income and small caps are two favored areas,” said Beaumont. He added that higher rates and increasing dispersion within asset classes is once again driving opportunities for active managers and alpha generation.
A few actively managed strategies highlighted for adapting portfolios in uncertain markets include:
Flexible fixed income: DNCA Alpha Bonds strategy can take short and long positions on the markets and tends to have low to negative correlation with major fixed income asset classes.
Flexible growth: Loomis Sayles Sakorum Long Short Growth Equity focuses on alpha generation from long-term exposure to high quality businesses with sustainable growth prospects – as well as shorts exposure to generate alpha and provide downside protection.
Global diversification: Loomis Sayles Global Allocation takes an opportunistic, best ideas approach, leveraging the firms’ renowned global research platform across equity and fixed income markets. Fixed income is used as an alpha driver and not just to provide ballast.
For more insights and ideas, visit Latin America or US Offshore.
Diversification does not guarantee a profit or protect against a loss.
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Por Funds Society, Madrid
Por Beatriz Zúñiga