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AIQ Editorial TeamGlobal Investment Thinking @avivainvestors
In the first of a new monthly series, we take a visual approach to illustrate topical data themes in economies, markets and beyond. This month we look at the correlation between stock market performance and vaccinations, the illiquidity premium in real assets, and whether there are still more men called Dave running funds than female managers.
Is there a correlation between equity performance and vaccinations?
There are many factors that affect stock markets; there is also a wide disparity between countries in vaccinating their populations against COVID-19. But is there any correlation between the two?
It would seem logical that the countries further ahead in the race to vaccinate are closest to a full reopening of their economies and might, therefore, have seen some boost to stocks. But looking at a sample of emerging market and developed market countries, it is hard to draw firm conclusions.
Perhaps one exception in an emerging market context is Chile. As Figure 1 shows, Chile has managed to vaccinate around a quarter of its population in a month; simultaneously, its stock market has surged, as Figure 2 reveals. Meanwhile, Brazil, which has the second highest death toll in the world, has not made much headway in vaccinating its population and has seen its market underperform so far this year.
The pandemic may have originated in China, but the country is widely viewed as having navigated a way through it better than most. This was a major reason for its outperformance in 2020, but the start of this year has been a different story. Despite a relatively low rate of vaccinations, the infection rate is also extremely low. More plausible explanations for its sub-par stock market performance are concerns over monetary tightening and fears over asset bubbles in international markets, a point made by one of the country’s top regulators in early March.
Figure 1: Percentage of population vaccinated in select emerging markets
Source: Refinitiv, Aviva Investors. Data as at March 10, 2021
Figure 2: Emerging markets stock market performance since vaccine rollout (per cent)
Source: Refinitiv, Aviva Investors. Data as at March 10, 2021
As for developed markets, if there was a clear link between the rate of vaccinations and stocks, UK equities would surely be booming. That simply isn’t the case, with the UK market underperforming both Germany and the US.
Clearly other factors are at play, including ongoing concerns over the country’s future trading relationship with EU countries after exports saw a sharp fall in January as the Brexit transition period ended.
Figure 3: Percentage of population vaccinated in select developed markets
Source: Refinitiv, Aviva Investors. Data as at March 10, 2021
Figure 4: Developed markets stock market performance since vaccine rollout (per cent)
Source: Refinitiv, Aviva Investors. Data as at March 10, 2021
Is the illiquidity premium in real assets going up?
As the chart shows, the economic shockwaves of the COVID-19 pandemic have been most acutely felt in real estate equity. However, underneath the crude average lies a wide divergence of fortunes; income from retail and hospitality assets eroded as tenants struggled to maintain rental payments. Logistics, on the other hand, benefited.
It will take more than a pathogen to dampen investors’ desire for yield
Yet, even though the short-term occupier outlook is negative, the medium-term view is more encouraging. In part, support is provided by the widespread between ten-year government bond yields and initial property yields in continental Europe and UK real estate.
It seems it will take more than a pathogen to dampen investors’ desire for yield and the illiquidity premium offered by real assets will continue to play an important role in portfolios.
Figure 5: Illiquidity premium in real assets (basis points)
Source: Aviva Investors. Data as at December 31, 2020
What’s in a name: Are there still more fund managers called Dave (or José, Olivier or Andrea) than female managers?
The investment industry has more reason than most to promote diversity. Aside from the evidence that more diverse teams deliver better results, it is also difficult to credibly engage with investee companies on diversity issues if your own house is not in order.
Gender diversity among fund managers in Europe is still a long way from perfect
Unfortunately, gender diversity among fund managers in Europe is still a long way from perfect. The UK stands out for all the wrong reasons, with female fund managers accounting for only 7.7 per cent of the total. That compares unfavourably with Spain, where 20.9 per cent of funds are run by women, France (18.1 per cent) and Italy (12.8 per cent).
Figure 6: Percentage of funds managed by men versus women
Source: Morningstar, Aviva Investors. Data as at March 12, 2021
Perhaps even more alarmingly, there are still more fund managers called Dave in the UK than female fund managers. The same situation applies in Italy – just swap Andrea for Dave. While the situation is slightly better in France and Spain, where there are at least more female managers of funds than those run by the most common male name, the overall picture highlights the considerable room for improvement in the industry on gender diversity.
Figure 7: Most popular fund manager’s male name versus female managers in total
