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The future of investing from ESG to the metaverse

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In This Issue

  • Lauren Taylor Wolfe pushes back on ESG criticism 

  • The next big thing in investing
  • Active fund managers are still betting on a soft landing
  • David Einhorn says the Fed’s ‘official policy is to make the stock market go down’

Exclusive panel replays from Delivering Alpha 2022

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Impactive Capital co-founder and managing partner Lauren Taylor Wolfe believes ESG without returns is "simply not sustainable." Roy Swan, director of the Ford Foundation’s Mission Investments, said the firm can invest around high-impact ideas while also maintaining the returns that are necessary to sustain a perpetual endowment.

Julian Salisbury, Goldman Sachs Asset Management Global Head, and Afsaneh Beschloss, RockCreek Founder & CEO, took a closer look at some emerging areas of interest, from companies paving the path to net-zero, to making the metaverse a reality, to monetizing the blockchain. 

Stock pickers are still positioned for a soft landing, mutual fund holdings show

Professional stock pickers are still betting that the U.S. economy could skirt a recession, according to Bank of America.

 

Actively managed mutual funds have maintained their pro-cyclical stance with overweights in consumer discretionary and industrials, while having a sizeable underweight in consumer staples, Bank of America's monthly analysis of fund holdings showed. Consumer discretionary and industrials are generally sensitive to economic turbulence, while staples are viewed as defensive stocks.

 

"Long-only mutual funds appear to be expecting a soft landing," Savita Subramanian, BofA Securities head of U.S. equity and quantitative strategy, said in a note.

The positioning showed that the cohort seemed optimistic about the economy even as the Federal Reserve is tightening monetary policy at its most aggressive pace since the 1980s. The central bank in September raised rates by three-quarters of a percentage point for a third straight time, vowing more hikes to come.

 

Big-name investors from Stanley Druckenmiller to Paul Tudor Jones have warned that an economic downturn is inevitable at this point as inflation turned out to be stickier than expected.

 

Still, mutual funds are not well positioned to hedge against stubborn inflation or a strong dollar.

 

Bank of America's data showed active managers remain "deeply" underweight the bank's basket of inflation beneficiaries, while their dollar exposure favors stocks less geared towards a strong greenback.

 

So far this year, 39% of large cap active funds are outperforming their benchmarks, higher than the 35% average over the past decade, Bank of America said. However, investor capital continued to flow into passive strategies from active due to lower fees, the Wall Street firm said.

Delivering Alpha Headlines

Big thoughts from the big money

David Einhorn is bearish on the market and dumping stocks

Greenlight Capital’s David Einhorn, who is crushing the market with double-digit returns this year, is selling stocks as the Federal Reserve continues to deflate the market with aggressive rate hikes. “As long as official policy is to make the stock market go down, so that people are less wealthy, so that they buy fewer things, so that prices stop going up, all while doing nothing about fiscal policy, we believe the correct posture is to be bearish on stocks and bullish on inflation,” Einhorn said in an investor letter obtained by CNBC.

JPMorgan president says market bottom not in yet

JPMorgan Chase President Daniel Pinto believes a recession might be the price to pay for the Fed to beat inflation. ″I don’t think we’ve seen the bottom of the market yet,” Pinto said. “When you think about corporate earnings heading into next year, expectations may still be too elevated; multiples in some equity markets including the S&P are probably a bit high.″ Pinto, who leads the world’s biggest investment bank by revenue, also called cryptocurrencies a small asset class that is “kind of irrelevant” at the moment.

Goldman COO says inflation is the single biggest issue

John Waldron, Goldman Sachs’ president and chief operating officer, said inflation is the biggest threat companies are grappling with right now. “Inflation is the single biggest issue we all have to tackle right now,” Waldron told CNBC. He said wage pressure and increasing commodity prices are particularly challenging and could eat into companies’ margins. On the U.S. consumer, Waldron believes Americans are not spending less but they are substituting.

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