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Sunday, 3 January 2021

What happened internationally in 2020

2020 in review on the global fronts — rethinking portfolios, Fed stimulus, tech, and ESG: Bloomberg recapped the trends of one of the most interesting years in global investing that challenged the relationship between stocks and bonds, and the resilience of tech and ESG. The business information service cites several key 2020 takeaways from global asset allocators including BlackRock and JPMorgan Asset Management.

The most exciting part of the story began in March, when both debt and equity markets tumbled almost overnight, challenging a long-held view that a negative correlation exists between stocks and bonds. Then, as governments and central banks flooded markets with liquidity, few expected such a speedy turnaround, recounts the business information service. “Normally you get more time to position your portfolio in a correction … [but] markets [were] moving so fast,” Mumbai-based co-chief investment officer Mahesh Patil said.

And nothing this year rallied faster than tech: The top 10 US stocks that led the post-March rally were all tech-related. Investors need to adopt valuation methods for tech stocks that take into account intangible factors such as goodwill and intellectual property, and not just traditional methods, Hong Kong-based Principal Global Investors’ Alan Wang says.

Assets linked to ESG also outperformed, the Financial Times says, proving wrong many sustainability doubters. An FTSE gauge of stocks involved in clean energy, climate change, and ESG is up 35% so far into the year due to large inflows by funds shifting their strategies toward impact investing. Those funds increase their ESG-linked assets under management by some 32% this year to a record USD 1.82 tn, data compiled by Bloomberg showed.

If it’s one thing market volatility has shown us, it’s the power of bottom-up portfolio building, or selective investing in strong companies able to withstand rough patches. “The resilience of stocks in a year like this helps to prove their worth and justify their higher valuation multiples in a low rate world,” BlackRock chief investment officer of US active equity Tony DeSpirito says.

Another defining factor for 2020: It was a boom for actively managed hedge funds, which posted their best performance since 2010, according to figures by data provider HFR cited by the Wall Street Journal. Hedgies outperformed relative to the S&P 500, making an average return of 11.9% between January and November. Their performance was described as something of a comeback after years of trailing behind a portfolio of grouped stocks and bonds, the WSJ cited Goldman Sachs as saying.

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