Another thing on investors' minds is the impact of trade negotiations between the EU and the U.K. on managers' portfolios. Allianz GI's Mr. Hofrichter said that the U.K. equity market remains undervalued due to a lack of trade deals with other countries. "It makes sense to hold on to (the U.K. market) from the long-term perspective. (But) I am not sure if the value will be unlocked soon. The economic impact is not dependent on one deal. In the short term we should expect growth to be held back," he said.
In terms of factors that will shape the business of money managers in 2022, Moody's Investors Service Ltd. wrote in a Dec. 1 publication that the outlook for managers remain stable. "Advisory models present new opportunities, while ESG and alternatives are driving demand," it said.
European managers said to keep up with investor preferences in 2022, they are focusing on ESG, alternatives and cryptocurrency capabilities.
LGIM's Ms. Laud said that 90% of new fund launches for LGIM will be ESG strategies and those aligned with the United Nations' sustainable development goals.
Ms. Laud added that the firm will also be focusing on marketing ETFs that focus on themes such as clean water and energy to give investors a barbell approach to core equity portfolio alongside opportunities in sectors that would benefit from the transition to the low-carbon economy.
In terms of managers boosting their alternative investment offerings, Mike Zelouf, London-based director of European and the Middle East business at Western Asset Management Co., which is owned by Franklin Resources Inc., said that traditional managers will continue to build up private markets as investors continue to seek income in a low-rate environment. "Allocations to private assets, direct lending, distressed debt, infrastructure debt and other types of opportunistic not (listed) debt is going to continue to increase," he said.
When it comes to managers building out cryptocurrency capabilities, Christophe Roehri, deputy CEO of French money manager TOBAM SAS, said the firm is working on new strategies and partnerships in Europe and Asia. Mr. Roehri said he would like to replicate TOBAM's partnership with Mackenzie Investments in Canada in other countries. TOBAM provides portfolio management for a multiasset fund with bitcoin exposure via ETFs for Mackenzie. TOBAM had $10 billion in assets under management as of September.
Mr. Roehri expects to find more opportunities in Europe, where clients would opt for exposure to bitcoin via listed stocks of mining companies or companies that are putting bitcoin on their balance sheets. Noting an 80% correlation to bitcoin returns that can achieved through both of these approaches, he said: "That was not the case 12 months ago." The strategy can get investors get two-thirds of performance and two-thirds of the risk, he said.
In Europe, the Markets in Crypto-Assets regulation is set to introduce a pan-European regulation on cryptocurrencies by 2023. "I think regulation will definitely help" to drive investor demand, he said.
For the time being, he said: "My expectation is that demand will accelerate as everyone is talking about inflation." Mr. Roehri said that the limited number of bitcoins makes it a better inflation hedge than gold.