Page 33 - Waterfall City Issue 12 2022

ACHIEVING

INVESTMENT

SUCCESS

BEYOND THE

SNOW GLOBE

By Anet Ahern, CEO at PSG Asset Management

T he year to date has certainly something of an artificial environment. this out in cash, where inflation is sure

to eat away at their wealth stealthily
Think of this as the ‘snow globe’. Inside
tested the resilience of
the easy cash, low interest rate snow
investors, and there is no
over time. In our view, this would be the
sign that the current market
while value strategies and short duration
volatility is about to abate. globe, risk and speculative assets thrived, wrong approach.
assets seemed dull, outdated and boring. We have a strong view that there are
While we anticipated that global Now that higher inflation rates and always opportunities in the market,
imbalances would have to unwind at normalising interest rates are exerting provided that you look beyond the short-
some point in time, there can be little pressure on the snow globe, the artificial term noise and prevailing narratives.
doubt that the current upheaval is bubble environment is starting to deflate Ironically, these opportunities tend
causing much discomfort for investors. and investors are realising it’s the dull, to appear at times like these, when
Part of the unease arises from the fact outdated and boring world outside that expectations have been shaken to
that traditional safe havens are proving is actually real. the core. The danger, however, is that
far less secure than previously thought: investors rely on what has worked
global bond markets recently saw their The unwinding of the imbalances previously, when the snow globe is
first bear market in over 40 years. It is built since the GFC was never likely to already a shattered relic of the past.
quite sobering to think that a whole transpire smoothly, but volatility has Those who do not adapt their investment
generation of bond investors has not been exacerbated further by stubborn strategies to the new realities may find
experienced a global bond rout before. inflation, geopolitical uncertainty, their ability to grow wealth successfully
and arguably the rise of the polycrisis into the future severely compromised.
AS ARTIFICIAL AS A SNOW environment. All of this has made for
GLOBE? a rather difficult time for investors. To succeed, investors will not only
After the Global Financial Crisis (GFC) Few reality checks ever turn out to be have to uncover opportunities that are
in 2008/9, central bankers maintained pleasant. Now, investors are facing suited to an investment environment
easy monetary policy to stabilise a the painful task of reassessing their that looks very different to that of
fragile financial system. When the investment strategies against the the past decade, but they will also
COVID-19 pandemic hit in 2020, central backdrop of an environment they were need the conviction to pursue those
bankers and governments responded not intended to navigate. opportunities despite high levels
by pouring further liquidity and fiscal of discomfort and noise. In seeking
stimulus into an ailing global economy. FOCUS ON THE to navigate the world beyond the
Access to easy money causes people to OPPORTUNITIES snow globe successfully, investors
assess risk differently than they would Investors will be faced with the very would be well served to partner with
when money is scarce, and, as it turned real predicament of building wealth in differentiated thinkers who construct
out, this time was no different. an environment that has brought new portfolios with long-term outcomes
challenges, most notably stubborn in mind and ensure that their overall
In a sense, excess liquidity and inflation and ongoing volatility. No strategy includes a truly diversified
deceptively low interest rates had created wonder some are tempted to simply sit opportunity set.

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