According to respected financial services company Fujisawa Toyama Group, the asset management industry is ready for the return of Alpha generation investing as growth is less concentrated in a post-pandemic world driven by rising inflation and interest rates.
In asset management, Alpha is a performance metric indicating when a strategy, trader, or portfolio manager has managed to beat the market return over some period. The excess return of an investment relative to the return of a benchmark index is the investment's Alpha.
"We are back to a more 'normal' cycle where we believe our investors will be rewarded for making sector and stock decisions related to prospective growth, comparative to what is priced," said Anthony Stone, Director of Global Securities at Fujisawa Toyama Group. "This should signify a return to Alpha."
Most stocks swung back in unison in the rebound from the Covid-induced downturn, making the current bull cycle an unfavourable environment for stock pickers. However, this market recovery has driven valuations to new highs, particularly in the growth-oriented technology sector, which may result in lower overall returns and less tech dominance in the hawkish monetary era, according to Fujisawa Toyama Group analysts.
"We believe that we are entering a new environment in which the influence of technology is rapidly expanding and will impact almost every industry," continued Anthony Stone. "As time goes on, it will become more difficult to differentiate between what is and what is not a technology company, and this will increase prospects across a wider range of sectors."
Tech stocks, particularly mega-cap firms, have outperformed the rest of the corporate sector in terms of earnings growth over the past few years. FAAMG - Facebook (now Meta Platforms), Amazon, Apple, Microsoft, and Google's Alphabet — is now 50% bigger than the entire global energy industry and nearly five times larger than the global auto industry (excluding Tesla).
About Fujisawa Toyama Group
As an independent financial services company, we work with worldwide clients to discover what their financial goals are — putting strategies together to ensure these goals can be reached. Fujisawa Toyama Group's wealth advisors are experienced professionals who know how markets behave and will help you identify your risk profile so that you can make more informed decisions about both your short-term needs as well as long-term objectives.
Sebastian Warner - Head of Investment Analysis
E-Mail: [email protected]
Telephone: +1 647 493 9480
Sales & Trading Office Address: 199 Bay Street, Toronto, Ontario, M5L 1L5, Canada
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Original Source: Fujisawa Toyama Group Reports as Alpha Generation Returns to Stock Picking