M&G Investments' Chief Investment Officer for Equity, Multi-Asset and Sustainability, Fabiana Fedeli, recently shared her insights on global investment themes and opportunities with COVER.

According to Fedeli, inflation is at record highs, but it may have reached a turning point that could come later this year or potentially next year. While it is not the time to make dramatic choices, investors need to stay diversified, play the components of the asset class, investigate selection, and stay tactical. The market is giving good entry opportunities to select stocks that will do well in the long term. She also emphasized that investors should focus on longer-term themes that will do well regardless of market conditions, such as infrastructure, the low-carbon ecosystem, and technology and innovation. However, investors should be careful when selecting opportunities because not all drops in share prices or increases in spread are tactical opportunities.

Regarding wealth managers who have large portfolios themselves, Fedeli recommended that they should manage their portfolios themselves if they have the capabilities, including access to data and the right people. For instance, during the time when Silicon Valley Bank and Credit Suisse were unravelling, M&G Investments needed banking analysts with more than 20 years of experience to guide them through the crisis.

Infrastructure is one of the longer-term themes that Fedeli believes will do well globally. In South Africa, infrastructure is particularly important, but it is essential everywhere. In the US, there is an urgency to fix infrastructure, while Europe aims to make its infrastructure more energy and environmentally resilient.  

The low-carbon ecosystem is another theme that is becoming increasingly important, driven not only by environmental considerations but also by energy security imperatives. Renewables are essential, particularly in Europe, where there are not enough sources of energy, and the region cannot rely on Russia and other countries.  

Lastly, technology and innovation, particularly AI, is where the future is headed. Any company that has strong intellectual property and is at the forefront of technology innovation may have volatility in its share price, but these are good times to take advantage of it.

She adds that global market sentiment has been going through some sudden wild swings this year, the most in a very long time. Fund managers can take advantage of this, but there can also be cases that when data comes out, it appears to change conditions or an investment’s appeal  dramatically, but in reality nothing has changed. So, as an asset manager it is difficult to know when to act and to know when to stand still. That is becoming the norm now, because before you could argue it was always difficult to know when to act, but now it is becoming just as difficult to know when to stand still.

Fedeli concludes by stating that one thing they tell clients is that: “our job is not to be exactly right with the prediction for the market, because nobody, or very few, is going be right, our job is to manage performance by understanding the odds of what is ahead of us. If we deliver on that, then we hope to serve our client's purpose”.

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