Unprecedented economic stimulus and the commencement of global vaccinations against Covid-19 have seen a wave of optimism about growth prospects in 2021. According to the Investment Management Association of Singapore (IMAS) 2021 Investment Managers’ Outlook Survey, half of respondents expect economic growth to accelerate going forward.
Conducted annually, the survey looks to understand the most significant trends and make forecasts from the viewpoint of top investment professionals. The 2021 edition surveyed 58 members comprising mostly c-level executives of fund management firms in Singapore managing over US$15 trillion ($19.96 trillion) assets under management (AUM) globally. The survey was conducted online in December 2020.
Besides their cautious optimism on growth, 66% of respondents anticipate the US Dollar to weaken by more than 5% relative to the Singapore Dollar. Accommodative Fed monetary policy aside, growing growth and Asia’s strong economic recovery are additional downward pressures for the greenback in 2021. Still, 22% of respondents cited inflation concerns in the new year.
US-China tensions lingered strongly on the minds of respondents, with slightly more than three in 10 of respondents citing this as a potential drag on growth. That said, the election of Joe Biden to the White House has seen respondents swiftly downgrade their level of concern regarding this. Biden is expected to pursue a less erratic foreign policy than his predecessor and renew relations with traditional allies, resulting in less geopolitical uncertainty going forward.
In contrast, investors were more concerned about further margin erosion threatening the growth of Singapore’s investment management industry over the next year. About 84% of respondents said this was a significant worry for them. Less than six in 10 were concerned about poor returns in active management vis-a-vis passive investment solutions while 55% feared that economic uncertainty would deter investors from putting their cash into the markets.
In spite of this, 2021’s outlook remains largely constructive. “Broadly, we believe that business growth will improve as we see increased consumer spending by households who have built up savings and are eager to resume normal activities,” notes IMAS Chairman Susan Soh.
The survey also found that fund managers are now more bullish on alternative class investments and emerging market equities. This is in contrast to 2020, which was defined by a growing interest in investing into private markets.
SEE: The year investors define and discover ESG
Growing green
A key area of interest for the future is in the area of Environment, Social and Governance (ESG) investments. IMAS reports that an overwhelming 86% of IMAS members considered ESG investing a key growth driver as compared to 68% last year. More than 7 in 10 respondents are looking to differentiate their business around ESG and sustainable finance.
“Investors across the globe are increasingly moving towards sustainable investments and this trend is also evident in Singapore as fund managers here have started to incorporate ESG and sustainability considerations in their investing processes,” Soh of IMAS comments.
That said, the novelty of ESG considerations in Asian markets could present implementation challenges. These include the integration of alternative data sources on climate change into the management of ESG portfolios of global investors. Nevertheless, 67% of respondents said that ESG and impact-focused strategy will be the top strategy in terms of popularity growth in 2021.
And IMAS intends to do its part to promote ESG investment in Singapore’s asset management industry. Says Soh, “Following the recent publication of the Environmental Risk Management Guidelines for Asset Managers that IMAS co-created with MAS, we will be launching a series of ESG training programmes for the industry to support our nation’s transition to a truly sustainable economy.”
