Investment vehicles that stand out for 2022. Know them.

News & Insights - December 27, 2021
Investment vehicles that stand out for 2022. Know them.

After 2021 of economic reactivation after the pandemic hit, the cards are laid on the table. All investors’ strategies focus on 2022, which could mean the consolidation of several schemes, albeit with the conditioning factor of high inflation and the logistical crisis the US is experiencing.

The headwinds felt since 2020 were left behind. Still, the uncertainty has not disappeared with the emergence of the new variant of the “omicron” coronavirus, so strategies still appeal to caution. At the same time, investors try to make the most of the opportunities offered by the market.

Within this context, some investment vehicles may mark the year 2022, bearing in mind that each of these carries a series of risks that must be considered and evaluated according to each investor’s profile.

1.- Exchange-Traded Products (ETPs)

Actively managed ETPs are estimated to have reached US$120.28 billion in net inflows as of last October, demonstrating the dynamics that this vehicle has registered throughout the year, according to figures from ETFGI, independent research, and consulting firm in that business1.

As ETPs have become more diversified and increasingly accessible, some investors see them as a key investment vehicle for their strategy. In the U.S., for example, they are keeping an eye on the performance of the first ETFs that track cryptocurrency futures, following steps taken in that direction by ProShares Bitcoin Strategy and Valkyrie Bitcoin Fund.

ETFs, one of the most popular exchange-traded products, offers global access to a myriad of investments and are characterized in that they seek to replicate the performance of an underlying asset ranging from cryptocurrency futures, as in that example, to commodities such as gold or a stock index.

The U.S. investment management company BlackRock highlights on its website that one of the qualities of ETFs is having lower administrative fees compared to other options, additional to liquidity, “which provides the possibility of converting investment into cash quickly and without loss of value2 “.

2.- Mutual funds

A type of alternative investment in which investors, natural or legal persons, participate in a fund and entrust their resources to an administrative company that manages them professionally.

According to specialists, these funds can invest in different vehicles and segments such as real estate, one of the most popular due to its characteristic of being a shield against inflation, which reached 6.8% in the U.S. last November, the highest rate in three decades.

Mutual funds allow individuals to access the real estate market without investing specifically in it. Investors provide financial leverage to companies specializing in real estate, giving them a more diversified exposure to the business and the returns from the activity.

This instrument has a longer-term horizon; one of its characteristics is that it provides diversification in the portfolio and does not require a millionaire capital as a direct investment in a property would demand.

3.- Green bonds

Government and private initiatives to promote environmental projects have given rise to green bonds: instruments to finance plans related to clean energy, adaptation to climate change, conservation of water resources, or more sustainable mobility.

The investments made from low amounts fund new or existing projects amid a scenario in which environmental awareness is becoming increasingly important globally, particularly after governments’ commitments at the most recent COP26 in Glasgow (Scotland).

According to BNP Paribas’ Global Outlook 2022: Bullish – Selectively report, the issuance of green bonds could grow by 60% globally thanks to the focus on sustainability, and the ESG criteria will adopt more decisively in 2022.

According to figures released by Statista, the world’s leading issuer of green bonds in the US, which in the first half of the year alone issued some US$37 billion, followed by Germany and France. Additionally, it indicates that last year “more than a third of the capital from green bonds used to finance the energy sector worldwide.”

4.- Capital markets

A problematic 2020 caused by the pandemic, 2021 brought hope to the markets, and the outlook for 2022 is positive, especially for the first half of the year, according to a recent report by BNP Paribas, which highlights that the Nikkei “is going to perform well in light of its valuations.”

The Global Outlook 2022 report also upgrades its forecast for the S&P index “because of the low probability of creating a new corporate tax in the United States.”

With the challenge of high inflation rates in several markets and the logistics crisis that threatens the supply of different industries, investors will bet on the most resilient businesses in this scenario. They will lean towards companies in segments such as technology, energy, or fintech when the financial sector shows good health.

According to the chief investment officer of Mercer Advisor, Donald Calcagni5 “Investors should be looking at tilting their portfolio towards high profitability companies, companies that can expand their margins, that have high degrees of operating leverage, companies that can pass on price increases in their supply chains to their consumers.”

5.- Crypto Assets

Increasingly adopted worldwide, cryptocurrencies experienced one of their best years in 2021, not only in value but also in media impact; after El Salvador approved bitcoin as a legal currency, the first country to do so.

Crypto assets became part of the portfolio of many global investors who are increasingly opting for segments that move millions of dollars, such as non-fungible tokens (NTF), which have earned a space in the music and art industry.

Last March, the American artist Beeple sold a collage titled Everyday: The First 5000 Days for more than US$69 million, becoming the third most expensive artwork sold by a living artist.

The sports industry also joined the crypto assets wave with fan tokens or the video game industry with blockchain-based “play-to-earn” titles that allow players to earn cryptocurrencies with their progress. The crypto-asset market is expecting to diversify and generate a wide range of investment activity amidst questions about its regularization.

References:

  1. ETFGI reports assets invested in actively managed ETFs and ETPs are a record 439 billion US dollars having increased 53.6 percent YTD in 2021. https://etfgi.com/news/press-releases/2021/11/etfgi-reports-assets-invested-actively-managed-etfs-and-etps-are-record
  2. EXPLANATION OF ETFs https://www.blackrock.com/co/educacion/etf/explicacion-de-los-etfs
  3. The United States registers its highest inflation in 30 years: 6.2% https://www.dw.com/es/estados-unidos-registra-su-mayor-inflaci%C3%B3n-en-30-a%C3%B1os-un-62/a-59781704
  4. Top green bond issuing countries in 2021, according to the value of the bonds issued. https://es.statista.com/estadisticas/1142469/ranking-paises-emisores-bonos-verdes/
  5. Stock Market Trends for 2022. https://money.usnews.com/investing/investing-101/articles/stock-market-trends-for-2022