A fresh approach to investment research that Paris-based Amundi, Europe’s only asset manager ranked in the global Top 10, adopted two years ago appears to be paying off by effectively guiding Chief Investment Officers and clients in maintaining investment discipline.
“Having a disciplined way to look at the market is helpful,” Monica Defend, the head of the Amundi Research Institute, told Investment Officer in this IO Talks podcast interview.
The Amundi Research Institute was created in 2022 to deepen the firm’s strategic dialogue with clients. The institute sits at the heart of the global investment process at Amundi, which manages some two trillion euro in assets. Defend, who joined the firm as a quant analyst in 1997, has been in charge since its launch.
The institute’s research now is embedded deeply in Amundi’s investment decision making, stretching from portfolio managers to the Global Investment Committee, where the CIO and his deputies come together, Defend explained.
“We work with the portfolio managers on a day-to-day basis, meaning that we are really part of the investment process, the multi asset platform, the emerging markets platform, providing them with analysis, tools, forecasts and so to derive profitable - hopefully - investment strategies.”
Outsourced CIO services
Amundi serves its institutional clients with an ‘outsourced CIO’ department, offering OCIO services, that interacts closely with the advice generated by the Amundi Institute. The firm began offering these services in 2021 to address clients’ strategic, investment and operational needs, especially for smaller institutional investors and family offices.
“The big achievement is when we talk to our clients, they really would like to replicate the approach we have,” Defend said. “This might be called advisory, but the takeaway for our clients is probably the tangible sign that what we do is going in the right direction.”
“What I see growing interest in in recent years is the way that we approach macro and markets,” Defend said. “I’m a quant. I was a quant in the past. This is my DNA actually. Having a disciplined way to look at the market is helpful, eventually. This is really what our clients all over the world, from Asia to the US down to the Middle East, are really interested in, having these kinds of tools properly shared and finetuned according to their regions and markets.”
In the podcast, Defend speaks about investing in a restless world, navigating geopolitical uncertainty, opportunities in emerging markets and on the impact of artificial intelligence on economic forecasting and investment decisions.
The tide is still turning
Amundi’s 2024 investment theme, presented at the release of its full-year outlook on 23 November, is ‘Turning Tides’, a title that reflects a conviction that interest rates have peaked and a bullish view on bond markets, among others. Global markets have rallied in recent months, with government bond yields declining up to 100 basis points.
Defend, speaking on 12 January, made clear that Amundi still sees the tide turning. The 2024 outlook is part of a broader picture that Amundi calls “the new global disorder”, led by changes in the geopolitical balance, in monetary policy, and a technological revolution underpinned by the emergence of artificial intelligence.
In terms of geopolitics, Amundi wants to know where to find opportunities, but also where to avoid specific risks. In the Middle East, the idea is that the conflict will stay confined geographically, with a focus on markets and oil prices. The election in Taiwan will influence the future relationship between the US and China. And then there are the US presidential elections in the United States and the EU elections.
“The risks obviously are there. But our base case is that they don’t boil over,” she said. “And obviously, depending on the results, we will have to finetune the allocation that we really implemented the portfolios.”
Emerging markets
Geopolitical changes also shape the lenses that Amundi uses to look at emerging markets. Three categories have emerged in Amundi’s vision. There are the “winners of influence” such as India, Saudi Arabia, Turkey, Brazil that are gaining influence through the use of their natural resources. Secondly, there are the winners of new defence treaties being signed with the US, such as the Philippines.
And finally, the winners of energy diversification, such as Qatar and Angola, because of demand for their liquified natural gas reserves, and central Asia and Latin America because of their rare earth minerals.
“The most interesting countries to watch are those that are taking advantage of the opportunities of diversifying supply chains in Asia away from China,” she said, referring to South Korea, Vietnam and Thailand. Morocco, she she said, stands to benefit from the relocation of the automotive sector away from Eastern Europe because of the war in Ukraine.
Artificial intelligence
Artificial intelligence, meanwhile, is also firmly on Amundi’s radar screen. Defend cautioned against expecting too much in terms of AI’s economic impact.
“Our evidence so far is that in order to see a material improvement in productivity, it will take time. It is not today. It’s more of a 10-year process. You need to train people to use artificial intelligence in a wise way. This takes time. It will change our lives. It is changing our lives, but seeing it as a tangible structural long-term and balanced effect on economies, that is more a long term process.”
Amundi will address the topic of AI in-depth in its next Capital market Assumptions report that is due to be released in April.