Amid a global economic slowdown and a low interest rate environment, there are still many ways to make money in the new year.
In a low-growth world in the developed markets and decreasing growth rate in emerging markets, there may be an opportunity in small cap stocks, said Ronald Temple, managing director and portfolio manager/analyst with Lazard Asset Management, at PMAC’s national conference in Toronto on Tuesday.
“Because even if the world isn’t growing very much, you can always find small companies that grow,” he explained.
Another strategy is using a concentrated stock portfolio of around 20 stocks instead of about 90 or so. He notes that there’s been a lot of demand for U.S. concentrated and international concentrated portfolios.
Global equities also present an opportunity, as there’s a long history of home-country bias in most countries. While passive investing may be fine in some markets, Temple advises against doing so in emerging markets.
“You want to be active there because it’s the most inefficient market,” he said. “Because there are too many different countries with too many different tailwinds and headwinds at the same time.”
When it comes to income generation, there might not be as many opportunities. Still, Temple believes emerging market debt presents a good opportunity due to higher yields. But he’s not fond of developed market bonds because the risk/reward is too asymmetric.
Read: Bond ambition
Another possibility to generate income is through a global equity income strategy. Temple warns that this strategy might not work with U.S. stocks because this would include utilities and real estate investment trusts, which he believes are currently overvalued. But he notes many companies outside the U.S. pay dividends.
“I think you’re getting more and more opportunities in an equity portfolio to get yield without having to risk too much of your capital in terms of balance sheet risk.”