UK - Tim Gardener, the former global head of consultancy firm Mercer and now chief global investment strategist, has warned illiquid assets are the greatest future risk for investors in an era of climate change.
Speaking at the Asset Allocation Summit in London today, Gardener told delegates illiquid assets such as private equity, property and infrastructure "are much more vulnerable to hardening attitudes" of regulation and reputation.
Investors will need to make sure that the selected asset managers are savvy enough to know the future impact of climate change and potential changes to regulation, since illiquid assets are very long term investments according to Gardner.
"Infrastructure will be impacted by the consequences of climate change," said Gardener, who insists investors should invest in the asset class, but warns investors should ask more questions.
In his keynote speech, Gardener addressed asset allocation in an era of climate change, arguing in the liquid asset categories, country differences are likely to be subsumed by broader economic themes.
The demand for commodities - which Gardener classifies as a liquid asset - will be impacted so alertness is required of investors.
When investing in corporates, investors should not look so much at the industry in which the company operates, bur rather at if the company is the 'best in class' in that industry, according to Gardner.
"Investing in sectors is not a wrong thing to do in terms of pricing, just as long as you realise which sector is going to have the most reputational risk and risk from regulation," he said.
Opportunities for investors can now be found in sustainability investments, such as clean tech, but also agriculture, forestry, and sustainable real estate, he continued.
According to Gardener, "the winning approach is likely to be ‘controlled optimism'," rather than evangalism, i.e. buying into a trend at any price, or the approach by so-called ‘believers', who are wiling to by at high prices.
He warned investors should take a holistic approach to asset allocation for the future, and should buy beta at the right price, while having a long-term view.
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