The world is aggressively seeking sustainability. While the topic has been around for perhaps a decade, the “awakening” really hit the public consciousness in 2020 and has now become a mega-theme. It’s transitioning into a revolution and shepherding an era of conscious capitalism that’s playing out across the investment landscape. This is not the traditional socially responsible movement that has historically involved divestment from tobacco, weapons and other so-called ‘sin’ stocks. This is about driving returns first, while providing social and environmental benefits.

While the world may have been on lockdown for most of 2020 due to the global COVID-19 pandemic, there were significant developments in non-U.S. securities litigation.

With vaccines rolling out across the globe, many see a light at the end of the tunnel for the COVID-19 pandemic. But government-imposed lockdowns and social distancing restrictions in response to the pandemic have had major effects on the working lives of office-based employees. For much of 2020, many employees worked from home (WFH), and survey-based data show that the appetite has grown for more permanent flexible working arrangements. Many employers appear to be acknowledging this desire for more hybrid remote work as they assess longer term office space requirements. What are the potential impacts on office space, commercial real estate, and urban centers from this kind of shift?

The past year has been one of considerable disruption in the way we live, work and play.  We have seen shifts in sentiment around the value of the real estate in which we conduct these daily activities. As we look to a post-vaccine world where a return to normal is in sight, we are asking ourselves: How much of the distress has been temporary and what has been permanently impaired?  At CenterSquare we have found that when it comes to real estate valuations, the REIT market offers early insight into the direction of pricing, with the private market eventually catching up. As we look out over the next several years, the REIT tea leaves provide a great deal to consider.

2020 was an incredible year in the capital markets. However, in the wake of very strong performance for both stocks and bonds over the past 12-months, as well as the past decade, most traditional assets are looking expensive. At the same time, concerns over inflation continue to build, and questions about the trajectory of Fed policy dominate investment conversations.

Institutional investors—including public pension funds, Taft-Hartley funds, mutual funds, and hedge funds—have a fiduciary obligation to recover monies lost through investments in public securities as the result of corporate mismanagement and/or fraud. These losses are often recouped through class action litigation, which pays out billions of dollars to defrauded investors each year.[1] When these lawsuits are settled, however, institutional investors often assume that their custodian will file a claim and collect the funds on their behalf. Unfortunately, this approach almost always leaves such institutions short, and benefits more savvy-minded institutional investors who often pick-up the money left on the table by those relying on their custodians.

Despite the Federal Reserve’s promise to keep the federal funds rate low and support the bond market via quantitative easing, interest rates have seen an acute increase since August 2020. The yield on the 10-year Treasury was 0.52% on August 4 and stood at 1.74% on March 31. Additionally, the U.S. Treasury yield curve has steepened dramatically since August, reflecting rising inflation or growth expectations. The “2s/10s” curve has steepened from around 0.50% to nearly 1.10% over the past year.

Throughout the pandemic many areas of real estate have suffered under the myriad of lockdowns and capacity restrictions needed to slow the progression of the virus. Office, retail and hospitality have all been hit especially hard. Unlike its counterpart, office space, both hospitality and retail have been suffering from the mass reduction of foot traffic from lockdowns and the lack of disposable income as mass unemployment has flooded the county over the past year. 

TEXPERS invited two experts with Putnam Investments, an Associate member of the association, to discuss inflation expectations. Shep Perkins, CFA, is Chief Investment Officer of Equities at Putnam and Donald E. Perks is a Quantitative Analyst with the firm.

The process of evaluating investment managers has evolved in the last several decades. In addition to comparing a manager to its benchmark, investors can compare peer groups, other investment products, and even factor-based funds to see how their manager “stacks up.”

As of December 2020, the world’s four largest companies by market capitalization are Apple, Microsoft, Amazon and Alphabet.[1] They are representative of the intangible economy, where the majority of a company’s value is created by intangible assets such as intellectual property, quality management and network effects. This is a significant shift from 30 years ago when companies like AT&T and GE, that mainly produced physical assets, were dominant players in the economy. Today, more than 90% of the market value of S&P 500 companies is estimated to be intangible assets.[2]

What do pension funds in Australia, France, Sweden and Texas have in common? Definitely not their asset allocation, level of transparency, governance system or cost structure.

As interest rates on investment grade bonds have fallen to near-zero, private credit has attracted increased interest from institutional investors. Callan expects that private credit will offer substantially higher yields and equity-like total returns while in some cases providing regular cash distributions. In exchange, investors must accept illiquidity, with individual loans having an average life of three to five years and fund terms typically ranging from five to ten years. Additionally, private credit potentially incurs higher credit risk as borrowers are often smaller than those able to access traditional credit markets.

What comes to mind when you hear someone mention energy investments? Most likely and especially in this state, thoughts turn to oil and gas. Investments might include stock in companies like ExxonMobil or Valero, maybe an allocation to an MLP strategy, or even a private equity investment in oil production from Texas’ Permian basin. No matter the flavor, most people think oil when they think of energy, and rightfully so as oil and natural gas make up almost 70% of U.S. energy supply.  

Interest rates in the US have recently begun to move higher after having collapsed last year following the onset of the COVID-19 pandemic. While there are numerous contributors to the move higher in interest rates, the primary catalysts are the expected increase in US Treasury issuance in order to fund the stimulus and the slow reopening of the US economy which may lead to increased economic growth. Given this backdrop, we look to explore the potential ramifications of higher US interest rates on equity prices and the resulting implications for client portfolios.

US core inflation likely will be volatile during 2021, as underlying economic forces continue to rebalance from the pandemic. The gap between actual and potential output will limit how much inflation can ultimately rise this year, leaving the Fed comfortable maintaining easy policy.

While we are favorable on the overall outlook for emerging markets (EMs), there is a wide disparity in the pace and stage of their recoveries from economic disruptions caused by the COVID-19 pandemic. While gross domestic product (GDP) expectations for all EMs decreased significantly because of the pandemic, this delta is significantly smaller for countries such as China that were among the first to experience widespread infections and implement measures to control the pandemic.

The term “infrastructure” has come to the forefront in recent months thanks to the Biden administration’s focus on renewing and improving America’s physical footprint through additional fiscal stimulus. It also has a dual aim of improving the pace of economic growth.