Association of the Luxembourg Fund Industry

“Interesting opportunities for patient, focused investors”

Micaela Forelli of M&G Investments speaks at the Association of the Luxembourg Fund Industry’s upcoming European Asset Management Conference. Photo: M&G Investments

Micaela Forelli of M&G Investments speaks at the Association of the Luxembourg Fund Industry’s upcoming European Asset Management Conference. Photo: M&G Investments

The Association of the Luxembourg Fund Industry holds its European Asset Management Conference on 21-22 March 2023.

In advance of the event, Delano spoke with Micaela Forelli, managing director for Europe at M&G Investments. She speaks on the “Engaging with investors in times of volatile markets” panel, Tuesday 21 March at 10:20am.

Aaron Grunwald: What do you want the audience to get most from the “Engaging with investors in times of volatile markets” session?

Micaela Forelli: 2022 was an unpredictable and volatile year: high inflation, rising interest rates, an energy crisis and slowing economic growth are just a few of the big issues investors are having to navigate. There was nowhere to hide as equities and bond markets both sold off. Given the current uncertainty about the global economic outlook and ongoing geopolitical tensions, it is likely that markets will continue to be volatile in the months ahead.

However, with this panel, we will aim to share with our audience there are interesting opportunities for patient, focused investors, appearing across markets--we just need to be very selective about them.

This is an environment where active management and selectivity will be key to preserve and grow our clients’ savings. We’re seeing companies in the same countries and in the same sectors showing very different results. Identifying upside performance requires drilling down into the details and only active investors are capable of that.

From your point of view, how has volatility influenced investor behaviour in the past few months?

Most market participants, both retail and institutional, seem primarily concerned about the outlook for growth and inflation, and how central banks will react. Over the past year, we have seen an ebb and flow in which of these they focus on and the extent to which they are worried, which has created significant price volatility. We expect this to persist.

In volatile periods such as 2022, where investors tend to overreact to market episodes, we think it is necessary to rely on an experienced fund management team and an investment process that tries to distinguish fundamentals from behaviour, and rationality from irrationality, to identify both traps and opportunities.

How has volatility changed how asset managers operate in the past few months?

Currently, we see the macroeconomic outlook as hugely complex and often contradictory, with risks to both the upside and downside. The lag in time between the raising of interest rates and the impact on economic growth only increases the uncertainty.

Against this background, we expect volatility in the markets to remain high, increasing the importance of adopting active management able to add value through allocation and providing tailored and highly flexible investment solutions that meet our clients’ needs. While further volatility is likely in the short term, from a long-term perspective we think credit offers strong attractive risk/return dynamics.

Other areas where we see interesting opportunities are flexible and dynamic multi-asset strategies and thematic equities, like infrastructure. Exposure to these asset classes should have the potential to diversify portfolios and allow for long-term returns across cycles.

Aside from your own talk at the Alfi event, which sessions are you most looking forward to hearing, and why?

I am looking forward to attending the event where I can see ESG is still a dominant theme and at the forefront of the industry’s ambitions [editor’s note: ESG-themed panels are held on Tuesday at 11:40am, 2:45pm and 4:40pm, and Wednesday at 12:05pm and 2:10pm]. Once again, I think active management is the one that will help clients meet their long-term financial goals and the only ones capable of bringing real positive change on sustainability.