Covid has transformed investing. Here’s how.

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March 31, 2021

If the pandemic has changed how we work, play and live – what has been the impact on the way we invest? BNY Mellon Investment Management CEO Hanneke Smits and John Porter, CIO equities at Mellon,1 look at its impact on firms, clients and managers.

Video calls may be a permanent fixture for fund managers in a post pandemic world. But so are extra research and due diligence steps. In a recent panel discussion on how the pandemic has affected the European funds industry – encompassing views from a business, client and manager perspective – there appeared to be many transformational positives.

BNY Mellon Investment Management CEO Hanneke Smits believes the current environment has levelled the playing field for many staff working from regional or smaller branch offices. After all, there are no headquarters when you are all squares on a screen, she notes. Smits, who became CEO in the middle of lockdown, says typically her role would have involved embarking on a world tour of introductions into the main regions BNY Mellon Investment Management operates.

“Instead I had to do it virtually and my sense is I’ve actually spoken with more people than I would have done had I met them physically,” she says.

Smits contends communications in general have improved. Now solely reliant on video communications has meant she is better able to “meet” and speak with a broad range of staff. “The entire financial services industry transitioned to working from home, very, very effectively. I don’t think we could have predicted that with 100% confidence.”

John Porter, CIO of equites at Mellon, also highlights increased communication in his role as a fund manager. “I’d argue that through the utilisation of video conferencing we now have better access to company management teams than we ever did before Covid.” Like Smits, he points out the funds industry has been quite resilient and adaptable and in the case of fund managers, some of the changes might very well be long-term or even permanent.

Porter points to the significant role government and central banks have played in supporting economies with huge monetary and fiscal stimulus, the implications of which managers will have to consider for years. Prior to Covid, technology was expanding into every sector and industry and the pandemic has only accelerated that trend. Today, identifying winners and losers against that backdrop will require a greater understanding of technology – who is benefiting and who is being disrupted, he comments.

In looking at the research structure of most fund groups – typically organised by industry, sector, market cap analysis – Porter wonders if it wasn’t time for some upheaval, calling the pre-Covid structure “woefully inadequate” for today.

To understand and analyse the business trends of today, a broader perspective is essential, he adds. “The breakneck pace of innovation is making market share more fragile than ever before. If you understand where innovation is happening and who is leading the way, you’re going to have a huge head start over most in creating a strong portfolio.”

1 John Porter will become CIO equities at Newton later this year. This is part of a transition of the equity and multiasset capabilities of Mellon Investments Corporation (Mellon), to Newton Investment Management, expected to complete in Q3 2021.

 

Risks:

All investments involve some level of risk, including loss of principal. Certain investments have specific or unique risks. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information contains projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or financial professional in order to determine whether an investment product or service is appropriate for a particular situation.

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