Top considerations for financial intermediaries in 2023
A sharp rise in macroeconomic volatility ended a decade of strong performance for 60/40 portfolios.
Now, investors must face the linked challenges of high inflation, rising yields and market volatility. To put this in perspective, inflation across all 38 members of the OECD between 2010 and 2020 (before the pandemic) ranged between 0% and 3%1. Now it is running at over 10%. This, combined with synchronised interest rate hikes (put in place by major central banks in response to inflation), risks triggering a global recession. Ironically, whether this economic contraction is mild or deep depends, at least in part, on the unpredictable path of inflation and further central bank responses.
In this report, we discuss regional monetary policy dispersion and look at how advisers and their clients can ensure portfolios are diversified both across and within asset classes, as well as by geography, sectors, factors, investment styles and non-traditional market betas. This diversification is vital as it will allow preparations to be made for a period of higher-for-longer interest rates, and an uncertain growth outlook.
Growing geopolitical risks and tightening financial conditions mean that wealth managers face an increasingly challenging investment outlook. The key areas we have addressed in this report will help advisers and their clients to navigate the year ahead.
Six areas of consideration for financial intermediaries
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1. Navigating recession risk
Global recession risk increases as central banks hike rates -
2. Capturing themes in private markets
Capture innovative strategies and sustainable opportunities -
3. A hedge fund renaissance
Rediscover hedge funds in a low-return world -
4. Adopting a pragmatic approach to net zero
ESG integration and engagement rather than outright exclusion
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5. Proliferation of alternative products
Raising awareness of wealth management product development
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6. Portfolio transparency and data “operational alpha”
Better portfolio visibility and transparency on ESG issues
New beginnings
Global Wealth Management Investment Survey findings
Allocating to alternatives
59% of respondents believe the biggest investment opportunity over the next three years is in diversifying portfolios away from traditional equities and bonds.
Investing in illiquid assets
73% of respondents are either currently invested or are considering to invest in illiquid assets over the next 12 months.
Sustainable investments
82% of respondents said that client demand for ESG products has increased over the past 12 months. The main driver for this demand was societal sentiment.
Investment solutions to suit your needs
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Implementation and OCIO
We can help you define, develop and implement your investment strategy by addressing areas such as governance, risk, sustainability and diversification. We flex our services to suit your needs and help you achieve your investment goals. -
Sustainable investments
We help you build a sustainable investment strategy that integrates environmental, social and governance (ESG) considerations; diversity, equity and inclusion (DEI) factors and seeks an optimal mix between positive change and favourable returns. -
Alternative investments
Leveraging our existing relationships with hundreds of asset managers around the world, we can help you identify and source new investment strategies, opportunities, ideas and innovations across private markets and hedge funds. -
Strategic research
Become a member of the MercerInsight® Community today to get access to strategic research from hundreds of thought leaders around the world, including Mercer and third-party publishers. It’s complimentary and easy to join. -
Asset manager research
By subscribing to MercerInsight®, an alliance with eVestment, you can gain access to data, analytics and our forward-looking research on asset managers and thousands of investment strategies across both public and private markets. -
Managing investment risk
Our Mercer Sentinel team can help you conduct due diligence and mitigate operational risks across your portfolios and strategies. We assess asset managers, custodians and other service providers to help you deliver on your governance objectives.
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