Equities
Equities posted strong gains to reach new record highs in many markets during 2021, in most cases without suffering major corrections.
The strong performance across equity markets was fuelled by a combination of GDP growth in developed economies and the impact of government stimulus programmes. These then fed through to strong corporate earnings results throughout the year.
Developed market equities delivered strong absolute returns overall, led in large part by the U.S., and large cap equities generally outperformed their small cap peers.
Emerging market equities started the year on a strong note, but declined sharply in the third quarter to end flat. This was largely due to liquidity and debt issues in China’s property market and declines in other areas such as technology and online-education companies. India and Taiwan were amongst the major emerging markets that posted strong gains.
Investor optimism tended to benefit cyclical stocks in 2021 at the expense of defensive stocks. In both developed and emerging markets, the energy sector led the way higher, followed by information technology, which recorded its ninth consecutive year of strong outperformance, and then financials.
The one dark cloud for equities in 2021 centred on supply chain disruptions and changing consumer behaviours brought on by the pandemic, which led to notable, if short-lasting, spikes in stock market volatility. The most affected industries included leisure, entertainment, airlines, personal products, autos and semiconductors. Defensive consumer staples lagged in developed equities, while consumer discretionary was lower in emerging markets.
“During 2021, EQD continued to concentrate
its active management capabilities in areas
with structural advantages and strong
prospects for future relative growth.”
ADIA actively manages public equity investments predominantly through the Equities Department (EQD).
During 2021, EQD continued to concentrate its active management capabilities in areas with structural advantages and strong prospects for future relative growth. The Department also allocated additional capital to low volatility strategies. At the other end of the risk spectrum, EQD also added several high-confidence external strategies with higher volatility profiles, to complement its existing risk exposures in preferred markets.
