People like a story. It helps them to better understand what is happening in the world than looking at columns of numbers or lines on a chart.
As one asset manager told portfolio institutional: they are “shorthand” for explaining complex systems.
Narratives, therefore, can have more influence on markets than the fundamentals. It could explain why when some markets crash people ask: “How did no one see it coming.”
Narratives that have dominated markets this year surround how inflation will play out and the impact wars in Ukraine and the Middle East will have on the global economy.
November’s edition of portfolio institutional looks in more detail at narratives and how investors could use them to gain an advantage.
The edition also looks at sustainability in emerging markets, social housing and how to build diverse investment teams.
We also sit down with the director of pensions at the Merseyside Pension Fund to discuss a realistic approach to net zero, while the Pension Protection
Fund’s head of ESG and sustainability talks about the option of last resort.