First it was the pandemic, then rising interest rates that battered listed property trusts. For those who might be tempted to get back into this market, their investment shopping list should include five key factors before taking the plunge.
With EY predicting a pick-up in the private credit market, the need to understand the risks inherent in this investment strategy that’s nearing $200 billion in assets under management has never been more important.
ASX update; a win for ESG
Sell off extends to four weeks, tech takes a breather, a win for ESG
The ASX 200 (ASX:XJO) fell to a nine-week loss before finishing down 0.8% for the day and 1.1%; making it the fourth straight week of losses.
The selling pressure was centred around financials, falling 1.2%, as geopolitical confrontations with China have increased investor anxiety. Healthcare remains the safe haven, CSL Ltd (ASX:CSL) and Cochlear Ltd (ASX:COH), finishing 0.5% and 1.1% higher.
Governance issues were front of mind once again, with Rio Tinto Ltd (ASX:RIO) announcing CEO Jean Sebastian Jacques, its Head of Iron Ore and Chief of Corporate Affairs, would step down following the damning inquiry into the destruction of the 25,000 year old Juukan Gorge; the share price outperformed the market, down 0.6%.
This is a major scalp in the push for greater executive accountability and strong governance. Australia’s financial services companies continued to face questions from politicians, the likes of AMP (ASX:AMP), Westpac (ASX:WBC) and NAB (ASX:NAB) grilled on harassment and cultural issues over several days in a sign of the times ahead.
Nasdaq’s worst week since March, European inflation muted, UK recovery continues
The Nasdaq finished the week falling 0.8% on Friday, down 4.6% for the week making it the worst performance since March. The S&P 500 fared comparatively better finishing flat but down a more palatable 2.5% for the shortened week.
The performance comes after an 11% intra-week fall to start September but a gain of close to 60% from the March lows; putting the weakness into context.
After being blamed for the incredible August rally, Softbank Group Corp. (TYO:9984) CEO Masayoshi Son, suggested his aggressive options trading in the major technology names may be put on hold following recent losses.
Elsewhere it appears the glass ceiling may have finally been broken with Wall Street investment bank, Citigroup Inc. (NYSE:C) announcing a woman, Jane Fraser as its next Chief Executive on Thursday, the first such announcement from a major Wall Street bank in history
Key takeaways: ESG takes centre stage, beware the froth, nuance required
Announcements from BHP Group Ltd (ASX:BHP), RIO and AMP in recent weeks have seen ESG or Environmental, Social and Governance issues become centre stage for both boards and investors; some would say about time.
Thus far the pandemic has hit the most vulnerable people the hardest, with a combined effort between Governments and the private sector required have any hope of returning the global economy to its previous state. This will require companies to consider all stakeholders, not just shareholder profits.
The tech sell-off and similar weakness in Australia’s BNPL names once again confirmed that valuations can overheat and that investors must ‘beware the froth’ by refusing to follow popular momentum and high-risk strategies.
This leads into my final thought, the growing importance of ‘nuance’ when investing in 2020 and beyond.
Broad brush views like ‘sharemarkets are overvalued’, ‘value outperforms growth’ and ‘tech is in a bubble’ are great headlines by offer little insight into the inner workings of the companies they represent.
In the coming months and years performance will be driven by a willingness to look deeper, beyond the headlines to find the best options from across the world.
