From a local public health challenge in a single city, COVID-19 has spiraled into a worldwide pandemic – unleashing a cascading series of humanitarian, societal, business and economic crises.
Given the extent of upheaval and uncertainty, it is difficult to predict precisely how the world will be different after the myriad effects of this pandemic have passed. This is exactly the challenge for institutional investors. Now, more than ever, they need to focus not only on the ongoing disruptions but also on how this episode will structurally alter the behavior of companies, consumers and governments well after the Great Lockdown is over.
Our focus in this report is on the long-term structural impact of the coronavirus crisis on companies around the world: How will firms respond to newly discovered operational risks and business vulnerabilities; to potentially permanent shifts in consumer behavior and preferences; and to incremental government regulations and interventions? These questions are critically important for investors as over 50% of a typical institutional portfolio is comprised of corporate debt and equity, both public and private.1
To explore these questions, we draw on the insights of over a dozen PGIM investment professionals across our managers. We believe long-term investors who anticipate the enduring transformations catalyzed by this crisis will be best positioned to navigate the investment opportunities and risks after the Great Lockdown.
1Based on the portfolio allocation of a large, US pension fund. Values were derived from the market value of the assets, as of June 30, 2018.