Whilst recent years have taught us to expect the unexpected the investment, landscape of 2013 looks set to be sculpted from fairly familiar materials. The volatile market will loom large on the horizon although the shadow it casts will, as ever, be constantly changing. Regulatory risk will continue as an imposing presence with the promise of stricter regulations transforming the investment scene. The increased need for capital preservation and an increased preference for risk aversion will also help determine the nature of investment in the next year. What underlying trends will these forces produce for investments in 2013? Here are 5 to keep an eye out for.
We have already seen in the States the increased appetite for alternative investment products as a more secure way to mitigate the risks of volatile markets and this trend looks set to become global in 2013.
An alternative investment is an investment product other than the traditional ones of stocks, bonds, cash or property. It may be a tangible asset (a work of art, fine wine or collector’s pieces such as antiques, coins and stamps) or a financial asset (such as commodities, private equity, hedge funds, venture capital or financial derivatives).
2. Regulatory risk
Investment support firms like APT (http://www.sungard.com/APT) have already rolled out packages to specifically address compliance and risks that new regulations, such as Solvency II, will bring to investors. One core investment area where regulatory risk will shape ongoing investments will be in the retirement fund market in the States. As the effect and scope of regulation ramps up in 2013 U.S. retirement funds will become increasingly cautious in their handling of the capital resources of beneficiaries. A forthcoming review and rationalisation of vast stable value and target-date holdings looks like it is definitely going to be on the cards.
3. Capital protection
The ongoing crises in European markets continue to reverberate through the global economy. The investment mantra across the continent will be to protect, protect, protect rather than buy, buy, buy. Capital protection will be king in Europe as investors exhibit an intense and almost compulsive need to shore up against potential ruin by protecting their current wealth with increased bank deposits and a growing fondness for guarantee wrapped products.
4. Retirement accounts
In Latin America we have seen the growing popularity of individual retirement account vehicles. This will see a strong demand in 2013 for long-term product which means there are developing opportunities for asset gathering here.
5. Risk aversion
Meanwhile over in Asia, during 2013 the focus will be on risk aversion much more than the subtleties of multi-asset class risk management strategies. The air of conservatism in Asia will see a preference for much simpler investment products. 2013 will be the Asian year of Asia-focused bonds, guaranteed funds, income products and unit-linked insurance products.
In many ways recent years have undermined widespread faith in our investment system and called into question the practices of savers, governments and the financial industry. Some investment theories and practices have fallen by the wayside but 2013 may be the year that existing trends begin to form a new shape for the investment scene.