2020 has been a challenging year for all areas of the economy, but businesses and individuals in the investment industry shouldn’t lose hope, with transactions still going ahead even in these difficult times.
However, that isn’t to say there isn’t a level of uncertainty to contend with. Going forward, fund managers have a host of new considerations to make when it comes to investments.
Managing risk with investments
A balance between understanding and managing risk is always required to succeed in the investment industry. Caution is key, and this has become even more true during the pandemic.
To adapt to this unstable environment, strategies have had to be altered, with institutional investors favouring debt over equity, and individual investors turning to capital protection, ESG and markets perceived to be more stable.
Deals must continue, and investment professionals need to do what they can to ensure this.
The impacts of recession on investment
A sustained recession may be on the cards, which will affect investment behaviour further. Now is the time to apply the lessons learned from the 2008 recession, including diversifying portfolios and giving more thought to long-term rather than short-term decisions.
Longevity is the goal and fund managers will have to change their behaviours to achieve this.
Which sectors are safe bets?
Depending on the geopolitical climate, which sectors are most popular to invest in can change. At present, and largely as a result of the coronavirus pandemic and the continued focus by governments around the world on the environment, investors seem to be favouring the following:
- Medtech and life sciences
- Renewables, energy efficiency and sustainability
- Social impact and infrastructure
- Logistics and consumables
Although consumables are usually seen as ‘recession-proof’, now that PPE has become part of daily life, businesses that operate in this area have become a more solid prospect for investors.
What will 2021 look like?
Now that the first batch of COVID-19 vaccines have started being rolled out, and Brexit (with or without a deal!) is set for 1 January, a level of certainty is being regained. As such, financially holding back further could create more problems. Particularly after the widespread financial relief offered by the Government in recent months, there will be an expectation for the investment industry to pull its weight in driving the country’s economic revival.
Many investors have funds ready to be deployed and with cash drag starting to take effect, it’s time for them to put their feet back on the accelerator, especially with change on the horizon in the form of capital gains tax changes, for example.
In what has been a difficult year for many, the investment market has battled through valiantly, emerging much better than it would have done 20 years ago. There are a number of reasons to be optimistic about the future, and fund managers will undoubtedly be a core part of the UK’s recovery.
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