Attention to detail: what do the main investment trends look like?

ESG now goes beyond environmental concerns – what are the key social and governance issues that take center stage for investors?
Ansari: From a social perspective, investors are now more aware of how organizations are built. Key issues [revolve around] How diverse is the workplace and workforce? And with the Covid-19 pandemic, many questions arise about the type of hybrid work that can be offered [to employees].

There are many cases where several large companies in Europe and the United States have to offer hybrid work or some form of it as a means of attracting talent. In fact, a number of institutions will need to embrace hybrid working in a very meaningful way, in order to not only attract but also retain talent.

From a governance perspective, you could almost say that many investors have already embraced it in a meaningful way. Governance is one of the main pillars of investing that existed long before ESG was coined as a term and is a key part of how investors think about what kind of allocations to make. Investors are eager to see how well-diversified the board members are. We see many investors now wanting more control over the quality of board construction, their degree of independence and the type of operational governance they have.

Is Diversity, Equality and Inclusion (DE&I) a key driver for regional and global investors?
Ansari: Clearly DE&I – as it is now called – is something that is directly very close to Mercer. So at the regional level, yes, it is [a key factor]. However, I wouldn’t say it’s necessarily an awareness, but more of an awareness that having a workforce from all walks of life, in terms of training , contributes to the overall depth of knowledge within an organization.

Thus, DE&I is adopted in the region. We see many large institutions in Kuwait, Qatar and/or Saudi Arabia diversifying their workforce in terms of women, senior women, and I think the realization is that the overall functioning of an organization is enhanced by a workforce of diversified work, which underlies it.

The Federal Reserve has raised interest rates, with further hikes on the cards, how has this affected investor choices?
Ansari: As the rates increase, the yield will also increase. But a broader question is, how do fixed income or debt securities fit into the portfolio? Investors reacted in different ways. Many clients consider things like private debt because unlike syndicated loan assets, they are more protected against things like rising inflation. So normally rate hikes would be something to react to. But given the current climate, amid high oil prices, runaway inflation, potential pre-recession in Europe and the US, many investors now need to take more alternative types of debt into their portfolio.

Oil has rebounded since the start of the year, and meanwhile cryptocurrencies have taken a hit. So how does an investor organize a balanced portfolio in such a scenario?
Ansari: Interest rates and oil are normally inversely correlated. So it’s kind of a rather unique but unusual situation. Clearly, commodities – given the part of the world we find ourselves in – are an asset class of choice for many of our investors, either directly or indirectly through many oil-driven assets. . So it’s not surprising.

In a way, crypto is a slightly nuanced asset class. Many investors we talk to in the local market do not hold crypto. However, from generation to generation, among the family offices we speak to today, there is an increased interest in using crypto as a safe haven. We don’t necessarily have anything around crypto to offer our customers. But it’s clear that they are interested in what it means to have crypto investments in their portfolio and even go so far as to say that crypto [may be] the new benchmark safe haven relative to gold. Again, this is a story that will unfold over the next couple of years as crypto potentially becomes more regulated and a bit more mainstream.

What key steps has the company taken to achieve its net zero goal for the majority of its funds?
Ansari: Let me answer it in two different ways. We have our own internal view of what net-zero should look like. We have 4,000 ESG rated strategies and our new offices in Dubai are smart offices, with an ESG slant towards them. But from a client perspective, we continue to onboard and assess managers, and increase our coverage of ESG-rated managers.