2020 Outlook: Dominick DeAlto, BNP Paribas Asset Management
Dominick DeAlto is Chief Investment Officer and Head of Fixed Income at BNP Paribas Asset Management.
What were the key themes for your business in 2019?
As an asset manager, the paramount theme at BNPP AM in 2019 was to find innovative ways to deliver the return yields that our institutional and individual clients around the world continued to demand. This task has become more challenging over the years as fixed income yields around the world have smashed through their once presumed lower bound of zero. Today, over $15 Trillion of sovereign debt trades with a negative yield! Our solution to own risk in the corporate, emerging and southern European debt space allowed us to sustain those yield needs in 2019. We expect, the combination of profound liquidity and accommodation postured central banks will continue into 2020.
What are your expectations for 2020?
After a decade where financial repression, risk complacency, and low volatility have driven the investment tide and all its asset class boats higher, we believe that investors will finally become more discerning as 2020 unfolds. It has almost become cliché for investors to call for higher return volatility and greater dispersion at the start of each year. What makes 2020 different, and why we call for this for the first time, is that central banks are nearing the end of their useful influence in this, the longest expansion in history. As a result, we expect both macro and micro fundamentals to weaken under the pressure in general; and in particular, for there to finally be discernible winners and losers.
What trends are getting underway that people may not know about but will be important?
We have finally crossed the Rubicon where the cost of producing sustainable energy has fallen below that of fossil fuels. This will not only influence the economic decisions of energy users, but will also begin to transform the entire energy production complex. The impact of this transformation will mean new industries, massive change to the industries that we know, and a death knell to those industries that can’t keep up. As investors, we envision countless opportunities that will arise from this next revolution. We believe a combination strategy of investment and avoidance will allow us to take full advantage of this trend, and will help us to deliver on our commitment to sustainability.
Firms are accelerating the buildout of digital transformation strategies.
Expect to see several new entrants in the equity exchange landscape.
CEO sees big potential for financial innovation in digitized assets.
Capital markets will continue to integrate and globalize.
SFTR implementation and the demise of LIBOR will be key themes this year.