A big priority for this year is adjusting to changed market conditions, Joseph Pinto of Natixis Investment Managers says in an exclusive interview with finews.asia. That will lead to organizational and process changes to keep us agile enough and ready as soon as things improve, he adds.
Joseph Pinto, how do you see developments in Asia as things seem to have gotten considerably more difficult since the start of the pandemic?
We have been in Asia since 1998. We currently have a presence in seven countries, including Australia and China, in Shanghai. We manage about 68 billion dollars in client assets.
How have the strict COVID-19 restrictions affected business?
It had a very strong impact on business travel and that is still the case to a certain extent given that the restrictions from country to country are very different. That makes things difficult. But, like many other institutions in finance, we have managed to shift activity to digital channels. That has helped a great deal.
«Our headquarters are in Hong Kong but we have a modest presence compared with the global banks»
The unexpected positive reception we got from clients was impressive and this is something that will stand us in good stead after the pandemic. I also hope that the situation will improve over the next few months, such as it has in Australia most recently.
Hong Kong is under pressure in many ways. COVID-19, growing influence from the mainland, prompted many companies to move resources to Singapore. How do you see the future of the former Crown colony?
Our headquarters are in Hong Kong but we have a modest presence compared with the global banks. We have around 30 employees working there. Hong Kong is mostly a distributor and not a production center. That is why we don’t have the same existential questions that other financial institutions do.
What are your priorities in what is turning out to be a challenging year?
Clients are exposed to many more asset classes than they were five or ten years ago. By that, I mean private market assets and fixed-income assets, which are far more extensive than they were in the past. ESG products have broken through and we will build on that. So has digitalization. The pandemic has accelerated both trends and that will keep us very busy.
«Demographics is another megatrend that has a massive impact on all aspects of life»
A big priority for this year is adjusting to changed market conditions. General economic perspectives, monetary policy, new working models for employees, and client expectations. That will lead to organizational and process changes to keep us agile enough and ready as soon as things improve.
Should we be looking at sustainable investments in a different light after the invasion of Ukraine?
No, I don’t think we should. The awareness of environmental and sustainable criteria (ESG) has only grown since the start of the Ukraine War. Investors around the world have become very sensitive to the issue of sustainability. Although the concept can be interpreted differently. Certain parts of the world emphasize the E (environment) while others look more at S (social) criteria.
In other words, the entirety of the concept is not fully understood. Doesn’t this also mean that the risk of war, such as we are seeing in Ukraine, has been underestimated, even ignored?
Ultimately it is about understanding the effects of adopting ESG. It is clear up to that point. Making sure that we protect the environment sustainably when investing and contributing to something that improves the state of the planet. It takes a very long-term perspective. It is a secular trend that is not primarily focused on performance.
Why?
There are environmental considerations. These have an increasingly large impact on the business world and investors need to grapple with this. Asset managers should also recognize the far-reaching change underway given the importance to company valuations. From that, you can infer performance.
«The S in ESG is interpreted highly differently across the world, as it is strongly influenced by culture»
Many studies have shown that the approach isn’t worse than normal investment strategies. In the meantime, it is often better. In other words, it is not just about price trends but a consistent approach to sustainability.
That seems to be a new way of thinking to a certain extent. One that promises a better world. But should the S be emphasized more when investing?
The S in ESG is interpreted highly differently across the world, as it is strongly influenced by culture. In Europe, the S is often connected with gender diversity, particularly related to female equality and empowerment. In the U.S. it is often about minorities. In Asia, it is about protecting workers’ rights. You must remember that when you talk about ESG criteria.
On top of this, the affiliates that operate under the Natixis Investment Managers umbrella are independent and set their criteria based on origin and direction. This is a high degree of intellectual freedom, and it is important to us as a way of preserving the identities of the different companies while being in a position to offer them a complete range of investment strategies.
What impact does the shift in central bank monetary policy have on your investment strategies?
Inflation caught the central banks off guard. They were in the last stages of their policy of keeping interest rates low and had started to raise rates. The recent events in Ukraine and the continued issues with COVID in China led to dramatic increases in inflation, making them intervene much more drastically. They have done that to a certain extent, but they are now in the middle of a dilemma.
Why?
Because it will have an enormous impact if they increase interest rates much more. That will make things difficult for countries with sluggish economies. When we look at everything, I think we need to face the fact that there will be lower growth in the short- and medium-term, which will lead to less market performance.
«Companies that are active in energy and climate change will become increasingly important»
Our affiliates have already changed their asset allocation as a result. And as we are seeing the performance has not been bad per se. Certain investment classes continue to do very well.
Which ones?
Private market assets continue to perform well and have little correlation with publicly listed equities. Generally, I do not see any alternatives to equities unless we are at the start of a long-term cycle of rising interest rates. Of course, we are navigating difficult times but that has not changed basic investment principles. Many investors have repositioned their portfolios and run down their risks. That has led to price corrections to a certain extent. But things are gradually coming back.
What changes do investors need to be prepared for?
Companies that are active in energy and climate change will become increasingly important, particularly in the context of ESG. The West’s attempt to reduce its dependence on Russian oil and gas and look for alternatives will have an enormous societal impact and offer new investment opportunities. One thing is certain, Investment know-how will be even more in demand in this changing world. The ability to spot megatrends early and develop new strategies that protect investors from inflation or rising interest rates.
If you look at your crystal ball, what investment trends do you see?
A large one will be the need for security, in daily life and cyberspace, for individuals and companies. Demographics is another megatrend that has a massive impact on all aspects of life. All these developments will happen in the context of equality, inclusion, and sustainable targets that are based on targets set by the U.N. and other institutions.
Joseph Pinto joined Natixis Investment Managers as Chief Operating Officer (COO) in 2019. In 2021 he became the Head of Distribution for Europe, Latin America, the Middle East, and the Asia Pacific. He started his professional career in 1992 at Crédit Lyonnais in the New York securitization business before moving to the US investment bank Lehman Brothers in the corporate finance area in London. Between 1998 and 2001 he was project manager for the strategy consulting firm McKinsey & Cie in Paris. Between 2001 and 2006, he was deputy CEO and member of the board of Banque Privée Fideuram Wargny. In early 2007, he changed to Axa Investment Managers, where he was Head of Business Development for France, Southern Europe, and the Middle East. Currently, he is also the deputy chairman and member of the board of the European Fund and Asset Management Association (EFAMA).
