- This article reviews the five types of financial assets that can help investors build their investment portfolio for 2023.
- It is ideal for market participants who manage portfolios for themselves and third parties.
- FlexFunds allows you to develop one of the investment vehicles that stand out.
This year, it is possible to invest in different types of assets
From the historical maximum of January 2022 to the relative minimum of October of the same year, the S&P 500, an index reflecting the general behavior of the stock market and the economy itself, collapsed by 28%.
Among the reasons were geopolitical instability due to the war between Russia and Ukraine, high inflation that reached levels not seen in more than four decades, and the consequent rise in interest rates by central banks.
S&P 500 drop. Source: TradingView.
However, from the tenth month of the year, the situation gradually began to change as investors started to discount a brighter future in which some investment vehicles could succeed again.
Proof of this was the performance of the S&P 500 mentioned above, which has recovered around 19% since the October low to around 4,150 points.
What investment vehicles can we find in 2023?
1. Exchange Traded Products (ETPs)
Products traded on the stock market or ETPs are investment instruments that replicate the movement of financial assets such as a set of shares, indices, currencies, or raw materials. Also, they include listed investment funds or ETFs.
Although global wealth in ETF and ETP products dropped from $10.26 trillion in 2021 to $9.23 trillion in 2022, it remains one of the world’s most important industries, according to figures from ETFGI (independent research and consultancy firm).
Within the ETPs, we find the ETFs that have expanded their range of offers and are increasingly accessible. The following graph shows the number of ETFs and ETPs traded worldwide up to March 2023, showing their increasing trend since 2006.
Source: ETFGI.
Among the most innovative ETFs to invest in, those related to the metaverse and blockchain stand out, where the catalog is becoming more and more extensive. Examples include Roundhill Ball Metaverse ETF (metaverse) or Invesco CoinShares Global Blockchain UCITS ETF Acc (blockchain).
2. Investing in REITs
Within the world of alternative investments, which are defined as those investments that are somewhat uncorrelated with secondary markets, we have REITs (Real Estate Investment Trust).
REITs are real estate investment companies that invest in different assets in this sector and subsequently lease. In this case, the money flows generated by these companies come from the leased real estate.
The good thing about these types of companies is that they allow access to the real estate market without the need to risk significant capital, and, as a general rule, they generate immediate liquidity if needed.
There are different types of REITs, each specializing in a certain segment within the real estate sector. For example, some SOCIMIs (Listed Real Estate Investment Companies) specialize only in renting offices or parking spaces.
It is possible to access this sort of investment through listed companies or through investment funds that invest in this type of company.
It is a type of alternative investment in which participants acquire a share in a fund and entrust their resources to a management company that handles them professionally.
3. Green Bonds
Government and private initiatives to promote environmental projects have given rise to green bonds. These are instruments to finance plans related to clean energy, adaptation to climate change, conservation of water resources, or more sustainable mobility.
Globally, issuers sold $443.72 billion worth of green bonds in 2022, with the upward trend expected to continue in 2023, according to data from the Climate Bonds Initiative.
According to figures released by Statista, the main issuing country of this type of bond in the world is the United States, followed by Germany and France. The largest capital allocations of the money raised by said countries were destined mainly to clean energy and sustainable construction projects.
In order to access these bond issues in a more diversified way, it must be done through investment vehicles such as funds or ETFs.
4. Stock Market
During 2022, equities lost much of their value, and very few companies managed to protect the investor. Looking ahead to 2023, market specialists rely on stocks from high-quality, large-cap companies.
“In response to the evolution of the economic and market outlook, the positioning of our global equity portfolio has shifted to a more defensive stance than the market consensus,” noted BlackRock.
According to the world’s largest fund manager, company-specific factors must be observed when it comes to specific stock selection, considering investors’ focus on inflation and growth policy.
A stock-based strategy can often be securitized through FlexFunds’ solutions. Contact us to find out how.
5. Cryptoassets
Increasingly adopted in the world, cryptocurrencies experienced one of their best years in 2021, not only in their revaluation but also in their significant media impact worldwide. Although the situation was reversed in 2022, in 2023, these assets seem to be gaining prominence again.
In fact, crypto assets have become part of the portfolio of many global investors who increasingly opt for segments that move millions of dollars, such as non-fungible tokens (NTF), which have gained a place in the music and art industries.
There are still many questions surrounding digital currencies, especially those related to legislation. In addition, it must be considered that although large projects support cryptocurrencies, they are still in a speculative market.
Sources:
- https://etfgi.com/news/press-releases/2023/04/etfgi-reports-global-etfs-industry-gathered-net-inflows-us6516-billion
- https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/global-green-bond-issuance-poised-for-rebound-in-2023-amid-policy-push-73931433
- https://www.blackrock.com/us/individual/insights/systematic-equity-market-outlook
