The London-based manager founded by alumni of Bankers Trust, Goldman Sachs and JPMorgan, writes that it has seen a huge uptick in inquiries from existing investors and first-time institutional investors since the US Election results and Bitcoin hitting a new high of USD107,000 as of 16 December 2024.

Nickel writes that its flagship fund, Diversified Alpha, a quant multi-PM fund, fuelled by a record YTD performance of over 30 per cent, has seen a 115 per cent increase in AUM since the beginning of the year with a particularly huge uptick in inquiries from prospective investors following the November 5th US presidential election.

The surge in inquiries comes predominantly from institutional investors with no previous allocations to the digital assets, reacting to prices in bitcoin exceeding USD100,000 milestone, the firm says, adding that it reached USD107,000 on 16 December and has gained over 150 per cent year to date.

Nickel Digital research in June this year found that while almost all (97 per cent) institutional investors and wealth managers surveyed expected bitcoin to surpass the USD100,000 landmark at some stage, however just one in five (20 per cent) expected that to be achieved within two years. Around two out of five (39 per cent) said it would take three years or more to hit USD100,000.  This year’s development, however, has exceeded even the most optimistic expectations, the firm writes. 

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, says: “The bitcoin bull market is here and BTC price point exceeding USD100,000 is seen by many as validation of bitcoin long-term value proposition.

“It is not just the USD100k landmark that sparks the renewed interest – there is a dramatic change in attitude among institutional investors driven by the anticipated changes in regulatory environment in the US but also gradual recognition of the role of digital assets in institutional portfolios.

“Statistical evidence shows that incorporating a small proportion of digital assets results in a significant positive effect on a multi-asset portfolio, without materially impacting the portfolio’s risk profile. The fluctuating relationship between equities and digital assets means that an allocation to the asset class enhances portfolio diversification.”

Institutional Asset Manager’s sister title, ETF Express, has recently launched a monthly cryptocurrency column, in partnership with Trackinsight and CoinDesk. Follow this link to read more.

The firm writes that this is the first such real estate vehicle dedicated solely to a DC audience, the Invesco Global Direct Property Fund (GDPF) aims to improve DC investment outcomes by investing in direct global real estate, offering potentially higher returns and a lower risk profile through portfolio diversification and straightforward access to a mainstream global asset class at low cost.

Importantly, GDPF includes specific and innovative liquidity terms for DC schemes, platforms and master trusts. The launch builds on Invesco’s range of global real estate funds established for different investors worldwide.

“We have long seen demand among DC schemes to invest in global direct real estate but there have been surprisingly few options for them. The launch of GDPF represents, in our view, a new approach for the DC investor and demonstrates Invesco’s commitment to being a leading provider of investment solutions to UK DC schemes and their members,” says Kate Dwyer, Head of UK Distribution, Invesco.

“This fund builds on Invesco’s long-term track record in the institutional market and our belief that DC stakeholders deserve the same opportunities as sophisticated institutional investors but with terms aligned to their needs. GDPF not only supports the DC industry’s focus on increasing allocation to alternative asset classes but also the UK Government’s Value for Money consultation.”

Simon Redman, Managing Director, Head of DC and Wealth at Invesco Real Estate says: “Improving outcomes for DC members through easily accessible investments in private markets is a key focus for many at the current time. Real estate is by far the largest private markets asset class, but it has not been fully optimised in portfolios. Despite recent macroeconomic news and equity and bond market volatility, real estate as an asset class has continued to offer attractive historic performance and low volatility.”

Sachin Bhatia, Head of Pensions and EMEA Consultant Relationships at Invesco, says: “GDPF finally gives DC members access to this asset class via a dedicated DC fund, which we believe will improve member outcomes. The fund leverages our GBP 73.8 billion real estate business where we have 40 years’ experience and, at its core offering, has an implicit sustainability focus with an explicit business-wide net zero target, which we believe enhances potential returns.”

The firm writes that DC pension schemes typically invest in direct UK-only property or global REITs. In contrast, investing in global direct real estate can potentially reduce risk and enhance returns. The UK comprises less than 5 per cent of global investible real estate and, by investing globally, DC investors can benefit from stable income backed by physical buildings but without the risk of being constrained to a single country, the firm says. Investors will also benefit from Invesco Real Estate’s active approach to reducing CO2 emissions, water and waste.

At launch, the fund will invest its assets globally through Invesco Real Estate managed funds that predominantly focus on direct properties in Europe, the US and Asia Pacific developed markets. Investors into GDPF will, therefore, be investing in a direct real estate portfolio of more than USD30 billion, which is one of the largest directly managed portfolios in the market today.

Examples of underlying investments include residential in Japan, logistics facilities in South Korea, healthcare in the US, and luxury retail in Milan.

Simon added: “With over 95 per cent of real estate markets around the world being outside of the UK, they offer different opportunities to those available in the UK and also react differently to market circumstances – there are compelling opportunities to invest in sectors such as Japan cold storage, Australian student housing, and US single family housing which are simply not available in the same way in the UK.

“GDPF will provide diversification through access to international markets and sectors that can be less volatile and potentially offer more rewarding income and growth.”

Just consider financial markets and economics in 2023. If you asked a professional forecaster last year at this time whether the US economy would slump in 2023, nearly two-thirds would have answered in the affirmative. 

Similarly, at this time last year, the bond market was convinced (or at least many investors placing bets were) that the Fed would end its rate-hiking campaign at 5 per cent and then cut rates two to three times by the end of 2023. 

Here are some of the top confident views Payden’s economics team are hearing that could be wrong for 2024:

“A recession is inevitable in 2024.” Coincidentally, this was also the top view espoused by many investors and most (65 per cent) of professional forecasters last year. A recession did not occur in 2023, but even with all the “soft landing” lip service, the professional forecasting community still puts a 50 per cent chance of one in 2024. Will consensus get it right in ’24? We doubt it. We think the chance of a downturn in 2024 is closer to 12.5 per cent. Instead, we expect at or slightly above-trend GDP growth powered by the resilient U.S. consumer. 

“…but the US. consumer is running out of savings!” To steal from Twain, rumours of the US consumer running out of savings have been greatly exaggerated. The personal savings rate has declined as consumer spending patterns normalised post-pandemic. However, the aggregate US consumer still sits on trillions in savings. More importantly, consumer spending and, thus, overall US economic activity growth is driven by income growth, not savings. Income growth remained robust through November 2023.

“The US government will not be able to finance its massive deficit.” As mentioned above, the U.S. budget deficit has widened, but the appetite from U.S. and global investors for Treasuries remains strong. Also, Treasury bill issuance financed much of the 2023 deficit, with US households and businesses enthusiastic buyers. And the US devotes less than 3 per cent of US economic output to paying US debt service costs, a manageable task for now.

“Stubborn inflation may force the Fed to overtighten, tipping the economy into a recession.” While we were more amenable to such views at mid-year with the economy running hot at 5 per cent GDP growth, flash forward six months, we see much more reason for optimism on the soft landing front. The six-month moving average of Core PCE’s monthly rate of change arrived in line with the Fed’s target of 0.2 per cent in October, and the unemployment rate remains near cycle lows. While we doubt the Fed will be quick to “declare” victory over inflation, we think it will take a few more months of data to seal the deal. As to claims the Fed’s recent “pivot” is due to politics (i.e., next year’s election), we’d point investors to the last six month’s core PCE data.

“Cracks are already appearing in global labor markets, and other central banks (ECB, BoE, BoC) will follow the Fed and soon start cutting.” Except for the UK and Canada, other major developed countries have fared better than many think. In addition, some central banks are even closer to achieving inflation goals than the Fed. For example, Canada’s core inflation sits just outside the central bank’s 1-3 per cent target zone. As a result, most central banks may cut less aggressively than markets predict, and the Fed will probably not lead the way, given the US labour market’s strength. That said, a significant source of financial market stress of the last 24 months—central banks moving aggressively to tighten financial conditions—has been removed from the equation. Finally, the BoJ shows little intention of tightening policy, another market dagger that may not materialise. 

“Escalating geopolitical issues will derail the global economy.” While tragic and unfortunate, geopolitical events tend to have a short-lived impact on markets and economic trends. Absent a sharp oil shock—a surge in oil prices that pinches the consumer pocketbook as we saw in 2008—a severe downturn induced by geopolitical events remains a low-probability scenario. 

“There’s no way credit/equities can rally from here.” First, fixed income is attractive based on absolute and inflation-adjusted bond yields compared to recent history. Second, the “soft landing” scenario—in which the Fed could fine-tune interest rates, rate volatility subsides, the U.S. dollar softens, inflation moderates, and the economy continues to grow—is a splendid recipe for credit sectors in the fixed-income market (equities, too!). Finally, to the question that tops bond investors’ minds—where are policy rates heading next year? Well, we again offer you a range of possibilities depending on the future path of inflation. (Ultimately, we expect the Fed to cut rates less than what markets predict, which might disappoint investors in the short term. As Fed Chair Jerome Powell said at the December FOMC press conference, the future can “evolve in many different ways.”

Ultimately, the goal is not to get everything right but to identify all the possibilities and eliminate errors so we are well-positioned for what might happen next. 

We’ll give Pericles the final say as his words have survived 2,500 years: “The key is not to predict the future but to prepare for it.”

This material has been authorised by Payden & Rygel Global Limited, a company authorised and regulated by the Financial Conduct. Authority of the United Kingdom, and by Payden Global SIM S.p.A., an investment firm authorised and regulated by Italy’s CONSOB.