VP at T. Rowe Price identifies top trends shaping the Canadian investment market
While Canada’s investment landscape may seem small given the size of the country, it’s no less dynamic and trend-focused. Speaking to BPM, Jonathan Flegg, VP at global asset management giant T. Rowe Price, says that the smaller market means he’s had the pleasure of working with a lot of great people, forming life-long connections and strong friendships. Something he counts as key to success in the market – as is the company’s commitment to rigorous research.
“I believe that [in order to be] a partner, a true partner to both plan sponsors and consultants, building trust is critical to mutual success,” Flegg explains. “T. Rowe Price is widely known for its research platform. We continue to invest in our research efforts to consistently deliver returns for our clients to help them meet their objectives.”
GLP-1, AI, ChatGPT
This commitment to ongoing research means that both Flegg and T. Rowe Price are consistently on top of developing market trends – particularly when it comes to the integration of AI in the sector.
“Some of the exciting investment opportunities and trends that our research analysts have identified today are driven by artificial intelligence,” adds Flegg. “[That’s] all the beneficiaries that are within artificial intelligence, from microchips such as companies like NVIDIA to the infrastructure and enablers…such as Apple, Amazon, Microsoft, Google. There’s also ChatGPT, which is very topical today. And a really exciting investment opportunity we continue to watch is GLP-1 drugs.”
Known for their effectiveness in treating conditions like diabetes and obesity, these drugs are now being explored for additional uses, potentially affecting other industries and companies.
“GLP-1 drugs, which have proven success in treating diabetes and obesity, are now being tested on many other uses, which will also have spillover effects on other companies and industries,” adds Flegg.
Identifying trends through research
Education and information dissemination are also pivotal in T. Rowe Price’s strategy. The firm conducts webinars and education sessions for board committees to deepen their understanding of these new technologies and their implications on investments.
“We’re very timely and thoughtful around producing thought leadership white papers so we can help our clients understand and navigate some of these investment trends where we have high conviction and a differentiated point of view,” says Flegg. “Many of the consultants that we've been connecting with have been engaged in asset liability studies with their clients. And while each of those outcomes is specific to the particular client’s needs, we have seen a lot of plans beginning to derisk. Given how liabilities have come down with the increase in interest rates, out of that we've seen a lot of interest in fixed income, specifically return- seeking strategies such as multi asset credit and emerging market bond solutions.”
Turning to retirement-specific topics, Flegg detailed the central role this plays in T. Rowe Price’s overall business strategy.
“Retirement is a really important and exciting topic for us at T. Rowe Price. About two thirds of the firm’s $2 trillion in assets under management in Canadian dollars is in retirement plans, which include defined contribution, defined benefit, and individual retirement accounts. We conduct research exploring a wide range of retirement related issues, from understanding member preferences and needs to trends in plan sponsor decision making on things such as plan design and investment selection. Out of that, we've identified a growing focus on decumulation and solutions that facilitate retirement income, the potential for personalization around investment solutions for plan members and the continued focus on financial wellness programs.”
ESG component in client expectations
And, on the investment side of retirement, Flegg adds that the big trend continues to be centered around simplicity of investment options for members in capital accumulation plans – something that's really reflected in the broad adoption and use of target date strategies.
“[Furthermore], we continue to see strong interest in ESG, not only around how T. Rowe Price integrates ESG research into our investment strategies, but also offering education on how we think about ESG and sustainability in other strategies.”
The topic of ESG, and adopting authentic and ethical ESG standards, is something that’s only continued to grow alongside client expectations. According to research from Finder, 76% of consumers would stop buying from firms that don’t take ESG seriously, with just 33% of investors classifying the ESG reports they’ve seen as ‘good quality’.
“As an active investment manager with a focus on fundamental research, I think we have the opportunity to drive value for our clients really in two ways,” adds Flegg. “The first is producing consistent net alpha to help our clients achieve their investment objectives and second is being a thought partner. [That means] engaging with them on the complexities across markets such as navigation of market dynamics or portfolio construction or risk management – and also on some of the shared complexities across business management such as DEI, ESG, talent management, and technology.”
And this focus on technology is key here, with Flegg adding that the COVID-19 pandemic actually accelerated the shift to online platforms and virtual interactions, highlighting the necessity of adapting to this new digital reality while maintaining a client-centered approach.
“Our observation is that the world now moves more quickly than ever,” he tells BPM. “Whether it be the permanent increase in virtual meetings or the growth of digital platforms off of which we can share more real-time insights. The common denominator is trying not to lose focus on the client and what their experience is.
“This means is that we have to be very thoughtful about not taking a ‘one size fits all’ approach across our client universe and we’re very intentional about curating a relationship that’s specific to the needs and focus areas of that particular plan sponsor or consultant.
