The wealth manager’s investment themes for 2021 mainly focus on tactical and structural themes geared to equity markets.

BNP Paribas Wealth Management has selected a short-term tactical theme to benefit from the economic rebound in 2021 focused on vaccines and recovery; three medium-term themes with a focus on the search for yield; two investment themes based on sustainability to integrate ESG criteria; and four themes that focus on major long-term trends such as the opening of capital markets in China, new consumption habits, the impact of demographic trends and smart technologies.

Structured products are in focus as BNP Paribas’ private bank is recommending them as a way to capitalise on some of the investment themes.

How to generate positive yield without taking much risk is harder today than ever before

‘In 2020, the virus acted as a powerful catalyst for some key themes selected a year ago, such as disruptive innovation, the digitalisation of consumption, and technological innovations in the health care sector,’ said Edmund Shing (pictured), global chief investment officer BNP Paribas Wealth Management.

The wealth manager is optimistic that 2021 will be a year of robust economic recovery, underpinned by historically low short- and long-term interest rates.

The first theme, ‘Vaccines, recovery and reflation,  takes advantage of the strong economic recovery expected early in 2021.

‘Very few investors could have predicted what we have seen [in 2020],’ said Shing. ‘One of the biggest recessions on record, one of the fastest recoveries on record and markets which have done incredibly well considering the economic damage.’

The theme is tactical in nature and looks to benefit from the industrial and consumer recoveries the wealth manager is expecting in the early part of 2021.

Theme number two, ‘Low volatility absolute return, is aimed at the challenges investors are facing in the current climate. ‘How to generate positive yield without taking much risk is harder today than ever before,’ said Shing.

BNP recommends that clients looking for positive yield at low risk levels include short-term structured products (typically between one and three years) offering at least some protection of the nominal invested in their portfolios. Underlying assets for these products may include oil, gold, equity indices or interest rates.

‘Sniffing out yield truffles’ (corporate and emerging market bonds, infrastructure funds and real estate) and ‘Constructing a new diversified portfolio for a changing world’ (asset diversification through selected commodities, currencies, US inflation-Indexed bonds, alternative Ucits and private equity), are both aimed at the medium term. 'Enter the dragon: China’s opening of capital markets and economic reform’ is one of six long-term themes suggested by the wealth manager.

The Chinese Communist Party’s five-year plan is focused on boosting domestic demand aand opening up these internal markets. ‘One of the key features is the focus on developing innovative new technologies, notably in e-commerce, electronic payments and moving on to software and semi-conductors,’ said Shing.

One Chinese share - tech company Alibaba - is already trending on the SRP database. In 2020, it appeared as the underlying of more than 1,200 primary market products across 17 different jurisdictions. It was particularly popular among investors in Switzerland (440), Hong Kong SAR (324) and the US (199).

‘New consumption habits in a post-lockdown world, theme number six, is targeted at dynamic investors who want to profit from new global consumption habits. According to BNP, this theme can be played with individual stocks, many of which are large caps and thus very liquid. Structured products, funds and trackers represent other investment solutions for gaining exposure to this theme.

How demographic trends are improving the quality of life (nutrition, housing, medical care) and enablers of smart technologies (artificial intelligence, big data, cybersecurity etc) are two more long-term themes. Two ESG themes also feature.