Instead of just talking about how AI can help advisory firms, we are sharing one of the ways we use it to get more value from conferences. The summary below is from a panel session on 'Economic Outlook, Asset Allocation, and Tilts for 2024' at the Insight Network Investment Leaders Forum, in which Director Jonathan Ramsay participated. We’ve added our view on each key topic and the actions we’re taking based on what was summarised. 

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Summary of the final session of the Byron Bay 2024 Inside Network Conference involving Jonathan Ramsay, Angela Ashton, Chris Forrest and Mirko Cugura. 

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ECONOMIC OUTLOOK, ASSET ALLOCATION AND TILTS FOR 2024

This panel session discussed how client portfolio advice will evolve over the next 10 years. Key points included:

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AI Summary: Asset Allocation Approaches

- Panelist 1 (Asset Consultant) suggested taking an "aggressively neutral" stance heading into 2024, avoiding major tilts for now.

- Panelist 2 (Adviser) emphasised focusing on the individual client's desired outcome rather than making big wholesale allocation shifts.

- Panelist 3 (Asset Consultant) cautioned against being swayed by short-term research and advocated for a core/satellite approach using index funds for efficient markets.

- Panelist 4 (Adviser) said they make allocation decisions based on where they think they can get the best value for fees paid.

InvestSense View/Action Points: 

We think we are starting to see the foothills of the next market and investing regime - spoiler alert there are not many fiscal or inflation hawks left! Look out for our next Weekly Newsletter for the latest conversation between Jonathan Ramsay and Economist, Andrew Hunt discussing this further. 

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AI Summary: Active vs Passive Management

- There was general agreement that passive index funds make sense for very efficient markets like large-cap Australian and global equities.

- Active management was favoured for less efficient areas like small caps, emerging markets, and fixed income where skilled managers can add alpha.

InvestSense View/Action Points: 

See above! Also curious to see The Druck and Jamie Dimon espousing similar views. One can spend too much time second guessing things - maybe a spoonful of confirmation bias helps you get things done! 

Portfolio management implications? We think you need country/theme specific passive ETFs to control your asset allocation (therefore used actively) while polarised markets means that for every expensive corner of the market something is just as cheap. The global small cap manager that we use extensively has been banging on about companies and sectors that are out of the limelight but have had their recession already and are resilient, cheap and growing. The last earnings season seems to be confirming the last point, which was the big question mark. Similar themes are seen in emerging markets and Andrew Hunt just articulated the same point coming from a completely different point of view. Food for thought…

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AI Summary: New Investment Products

- Private equity, private credit and other alternative investments were seen as likely playing a bigger role in portfolios going forward.

- But the panel warned about lack of transparency, liquidity issues and idiosyncratic risks in many private market products.

InvestSense View/Action Points: 

We are doing a lot of work on this at the moment as we think there are opportunities and risks in equal measure. In private equity, we think there is still a valuation overhang in many parts of the market (particularly at the big end of town) but there is also greatly increased demand for capital and less supply (no more free money). We are more keen on areas where we can have greater transparency and the local idea presented at the conference could be a candidate. We’ll let you know. 

In private credit, similar themes apply and the line of audience questioning suggests to us that our clients (advisers) also get the upside but would like to know a little bit more about what could go wrong. Look out for our forthcoming white paper: The Tenth Year: What to expect from private credit in a recession. 

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AI Summary: Role of Technology

- Managed accounts and model portfolios are becoming standard to increase personalisation and efficiency.

- But technology should not dictate the investment strategy - the focus must remain on client outcomes.

InvestSense View/Action Points: 

Can’t argue with that and in a panel that consisted of 2 SMA managers and 2 advisers you can guess where the emphasis came from! The second quote is worth dwelling on and (in a one-eyed way of course) we think the themes at the top of the page are germane. It is incumbent on us to look out the front window and, when we see something, do something. Could this be at odds with Your Super, Your Future? More generally the panel discussed the importance of granular analysis, understanding risks, and continuous learning as the industry evolves over the next decade. And here we are...