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Watch as David Hunt, President and CEO at PGIM, assesses the current investment landscape and shares his perspective on four key trends that will shape the industry in 2022, including:
President and Chief Executive Officer
David Hunt
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>> Greetings. About this time of year I'm always asked, what are the major trends going to be for the next year? And I thought today I would share with you four of the things that we really have our eyes on as we head into '22. First trend that I want to highlight has been around actually since the GFC, but now, with the very low real interest rates that we face this is a dominant theme that is affecting all portfolios, from portfolio construction right through the securities selection. And as long as rates stay where they are, we expect in general risk assets to do well, and we expect this hunt for yield to continue to drive flows into higher yielding products. The second trend I want to highlight is ESG. And I do think that '22 is going to be the year that ESG goes global. ESG has been a dominant force in Europe, and we've certainly seen many of the European managers, certainly institutions, and now increasingly retail investors, use ESG as a major way of thinking about how they want to allocate assets. In the United States and in many parts of Asia and the rest of the world, there's been discussion and discussion about ESG, but there hasn't really been money in motion. And in 2022 I believe that is going to change. We are going to see the maturation of ESG, we're going to see if better defined, we're going to see more measurement around it. And we're going to see more money moving around the world this time, into ESG products. Personally, I think that the place this is going to start is going to be in climate. And I think that that's the place that we're all furthest along in being able to truly quantify the role that climate plays, in portfolios. One of the things that I expect in '22 as well is that we are going to have a bit of a wash out of the greenwashers. The people who have treated this as basically a bit of marketing paint, are now going to be paying the price, because the really hard work that many of us, and I would include PGIM in this, have done to include hard measures of ESG in our investment process will begin to really shine through.
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So, as we look at the industry, we see the continued growth and maturation of private equity. We see private credit continuing to grow, and we see real estate, both debt and equity as really important components. And now with right across the globe, and in particularly with the Biden Administration's focus on infrastructure, that's going to be another important asset class. At PGIM, we're one of the world's largest private asset owners, and we do believe that these classes offer not only substantial yields over comparable publics, but actually really good longer term credit protection in many cases, because of the kinds of covenants we're able to negotiate.
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One of the things that's really surprised me is just how transformed a lot of the interactions that we've had with our clients. and in many ways for the better. We found we've been able to get our clients faster information, that we've been able to organize meetings more quickly. That our investment ideas and market themes have actually resonated in a way, because we've been able to move quickly, that we didn't have before. And so, we want to keep, I think, a broad range of ways of interacting with our clients, while of course recognizing that still in-face meetings for some topics are really important. The same I think is going to be true for our own internal interactions. And all of us as an industry are going to be experimenting and learning as we go. We know that there are many parts of the work from home that we actually found were very efficient and that we really liked. And by the way, none of us missed our commutes. At the same time, we all know that there's some things that really do need to be done in-person. This is an industry where people and culture are the most important assets. And so, coming together for investment meetings or things where we need creativity, where we need to challenge each other quickly, we know is important. Our industry's built on mentorship, we know that doesn't happen well over Zoom, and we're going to have to be together. So, '22 is going to be the grand experiment. How do we come back together for those things which are so important to great investing? And how do we maintain the levels of flexibility and productivity that we have enjoyed over the last 18 months? It's going to be fun to learn together.
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