Survey points to additional US rate cut

According to the inaugural Franklin Templeton Institute Global Investment Management Survey, the US Federal Reserve will deliver four interest rate cuts this year, in line with the four cuts predicted by the futures market and one more than the three cuts projected by the Fed’s own “dot plot.” As a result, the 30-year mortgage rate is projected to fall from nearly 6.7% to roughly 5.6% by the end of 2024.

The survey results take in the views of 300 of the firm’s senior investment professionals from different teams worldwide, across public and private equity, public and private debt, real estate, digital assets, hedge funds and secondary private market investments.

The four cuts predicted by the survey will lead to the federal funds rate ending the year at 4.30%, while the Fed dot plot shows 4.63%. The research also found that global growth will be slower than consensus expectations across major regions and noticeably weaker in Europe and China. Inflation will continue to moderate, but slower than consensus and remain above central bank targets.

In equities, the survey predicts that the S&P 500 Index will end the year at 4744, essentially flat from where it was at the beginning of the year. There will be 5.8% earnings growth in the US, significantly lower than the 9.7% expected by the market. Value stocks look more promising than growth stocks, and US and emerging markets should be preferred over non-US developed markets.

For fixed income, two-year Treasury yields will likely decline meaningfully, while 10-year yields are expected to move only modestly lower. Municipal bonds will continue to be a high quality, diversifying investment option with attractive tax-free yields. The market should favour investment grade debt due to its higher credit quality as default rates for high yield debt continue to tick higher toward their historical average.

In the alternative space, commercial real estate presents some interesting opportunities within sectors like industrials, multifamily and life sciences; still, the survey notes that challenges in the office sector will persist. Private credit managers have filled the void created by traditional lenders, and they can negotiate favourable terms within sectors like industrials, multifamily and life sciences. Secondary investments provide diversification across vintages, geography, industry and types of private equity. Within the hedge fund space, macro and market neutral strategies look attractive given elevated geopolitical risks.

 

Sweden joins TIPS, Eurosystem instant payments platform settles in kronor

Swedish market participants are settling instant payments in Swedish kronor in the Eurosystem TARGET Instant Payment Settlement (TIPS), after a successful migration over the past weeks. Sweden is the first non-euro area country to join TIPS with its national currency.

The technical connection between Sveriges Riksbank’s real-time gross settlement system RIX-RTGS and the TIPS platform was established in May 2022. Since 19 February 2024, the Swedish market has been fully onboarded to TIPS, with 11 payment service providers that can transfer funds in central bank money between their Swedish kronor accounts in seconds.

Sweden is one of the world’s most advanced countries regarding instant payments, with around 1 billion payments settled in 2023. The new connection allows payments with the Swedish person-to-person mobile payment solution, Swish, to take place on TIPS using the single instructing party settlement model.

TIPS is designed as a multicurrency platform and now offers instant payment settlement in euros and Swedish krona. The onboarding of Sweden paves the way for other non-euro area countries that have also expressed interest, such as Denmark and Norway, to join TIPS.

 

Finance leaders should consider change fatigue in project planning

Finance employees are facing unprecedented levels of change and are becoming increasingly fatigued by it, creating a business risk that can drive down employee performance, according to Gartner, Inc.

“Change fatigued employees exhibit much lower intent to stay, responsiveness and discretionary effort, among other negative outcomes,” said Hilary Richards, vice president analyst in the Gartner Finance practice. “When considering change fatigue in their functions, finance leaders tend to fixate on the number of changes an employee is experiencing which is only part of the story.”

Gartner recommends that finance leaders consider several change fatigue drivers and chart them against project value to reprioritise their project portfolio to lessen change fatigue.

“It’s important to understand that the volume of changes is an important factor driving change fatigue, but it is not the most important,” said Richards. “The most important factor is the level of disruption rather than the volume of changes.”

Gartner defines disruption in this context as the extent to which changes personally affect employees and interfere with day-to-day tasks and employee performance. Three main factors - day-to-day changes compound; relying exclusively on top-down change management disempowers employees; and reactive responses to change fatigue lead to burnout - make the level of disruption the most significant factor behind change fatigue.

In addition to reprioritising the project portfolio, Gartner recommends that finance leaders develop a methodology to determine the level of small change fatigue in their staff, and to assign new projects and initiatives accordingly.

 

Crédit Agricole taps Demica to expand Asia receivable and supply chain finance offering 

Crédit Agricole CIB has launched the Optim Receivables and Supply Chain Finance (RSF) platform, white-labelled by Demica. The platform serves as a means to improve automation and minimise operational risks. With this strategic partnership, the bank’s clients should be able to optimise working capital requirements through the inclusive digital platform, and meet their extensive global receivables and supply chain finance needs utilising the platform’s capacity to access financing of invoices in various currencies and in a large volume.

Demica’s platform offers a range of supply chain finance products to banks, who can white label the solution and tailor it to their customer needs. The technology firm has enjoyed a long partnership with Crédit Agricole CIB, and is now enabling their customers in the Asia-Pacific region to have access to receivables and payables financing solutions in one environment.

Implemented in less than a year, the teams have developed direct interfaces between Crédit Agricole CIB’s back office systems and the Demica Platform, including interest and FX rates, bespoke payment interface combined with tailored funding reports.

 

Fixed income investors outpacing equity investors in ESG adoption

Fixed-income investors are more likely than equity investors to view environmental, social and governance (ESG) criteria as an important factor in their investment decisions. Some 40% of the fixed-income investors participating in a global study from Coalition Greenwich say ESG factors are an important or very important part of their investment decision framework, compared to only 29% of equity investors. Conversely, half of equity investors felt ESG factors were not important, compared to one-third of fixed-income investors.

“Fixed-income investors place a higher value on ESG data in large part because they view it as an important consideration in risk management,” said Stephen Bruel, Senior Analyst at Coalition Greenwich Market Structure & Technology and author of ‘Why ESG Matters to Fund Managers: Equities vs. Fixed Income’. “In contrast, equity investors see ESG primarily as a means of perpetuating their corporate values and driving impact on sustainability.”

Many factors help determine how and to what extent investors employ ESG in investment decision-making across individual asset classes. Equity and fixed-income products trade differently, with different levels of electronification, automation and types of execution venues, and the types of fixed-income securities are much greater than in equities. In addition, these products are fundamentally different - the former is a debt owed, and the latter an ownership stake. These and other related differences must factor into a portfolio manager’s investment - and ESG - decisions.

The diversity of instrument types in fixed income means generalisations about ESG across this asset class may not always hold. For example, while money market funds may care greatly about sustainability issues, holding short-term paper does not necessarily lend itself to making an impact from a sustainability perspective.

“Fixed-income and equity managers agree on one point,” added Bruel. “They both believe strongly that driving sustainable impact through allocation of capital is a use case for ESG.”

 

Most UK adults believe the concept of retirement is dying out 

Most UK adults believe the traditional approach to retirement is becoming less common, with many planning to carry on part-time work even once retired, research by SmartSave, a Chetwood Financial company, has found. 

The digital bank commissioned an independent, nationally representative survey of 2,000 UK adults. It found that 44% of those still in work believe they will retire at 66 or younger, compared to 42% who expect to retire past the current state pension age (66, set to rise to 67 in 2026). 

The vast majority (73%) of the second group (those who think they will retire past the current pension age) said that the traditional approach to retirement – entirely stopping work at a particular age – is becoming less common. Two-thirds (65%) of this group envisage doing some form of part-time or freelance work even once they enter retirement.  

The research highlighted several factors contributing to people’s changing attitudes towards retirement. A third (34%) of those planning to retire at 67 or later stated that technological advances, remote working, and the gig economy blur the line between working life and retirement. Almost half (48%) of those predicting a late retirement said they want to keep working beyond the state pension age, while 57% would do so to fund a better lifestyle in later life.  

More generally, 54% of all survey respondents agreed that ‘the ability to “fully retire” is increasingly becoming a privilege that only the wealthy can afford’.

 

One-third of CFOs involved in developing enterprise GenAI strategy

CFOs are among some of the C-suite executives most involved in developing enterprise generative AI (GenAI) strategies at their organizations, according to research by Gartner. In the survey of 822 functional leaders in November 2023, 34% of respondents identified CFOs as being involved in developing GenAI strategy for their enterprise. More than half (55%) listed the chief technology officer (CTO) as involved in developing GenAI strategy for the enterprise, followed by the chief information officer (CIO) at 48%, and then the CEO at 45%.

“The large majority of CFOs continue to be displeased with the performance of digital investments across their organisation,” said Alexander Bant, chief of research in the Gartner Finance practice. “GenAI spend is expected to be five to eight times higher than last year at most organisations, and many CFOs are playing the role of copilot to ensure these investments drive measurable benefits and profitable growth without unduly increasing risk.”

To help CFOs navigate this trend, Gartner experts have identified three likely stages of GenAI deployment in enterprises: Defend, Extend and Upend. The defend stage is where organisations must pick the low hanging fruit offered by GenAI and develop proper governance and employee understanding on responsible use of the technology. The extend phase will cost more but will also have greater potential returns. This is where an organisation would invest in more customised applications of GenAI technology, tailored to its unique circumstances of value proposition. The final scenario is one where GenAI upends an organisation and disrupts its entire industry. This is likely to involve shifts in employee productivity or business efficiency so profound that they lead to new products, services, and markets alongside new competitors in a similar way that tech giants have disrupted adjacent markets in recent years.

 

Hubpay to launch digital global currency account for UAE-based businesses

Hubpay is poised to unveil its Digital Global Currency Account, enabling businesses to send, receive, and manage funds across 38 different currencies, including USD, and wallets, all through one multi-currency business account and IBAN.

This solution lets users create named accounts, facilitating efficient fund management without the hassle of currency conversion. It also includes a multi-currency IBAN feature, enabling money transfers in 38 currencies using a single set of account details. In addition, for a business collecting multiple currencies, only one IBAN needs to be attached to an invoice. The programme automatically reconciles the currency, saving time on invoicing and reconciliation.

The account also offers expedited settlements, allowing businesses to expand into new global territories with same-day and next-working-day transfers. This streamlined approach aims to empower large and mid-size corporations to manage all their online business accounts efficiently in one centralised platform, according to a statement on the company’s website.