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How are investors tackling the issues of de-globalisation and the impact on their portfolios?[vc_quotes layout=”accordion” 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title=”Speakers” el_class=””][vc_quotes layout=”accordion” 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title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Key takeaways
Kate
One of the mistakes we made at the Bank of England was that we thought the GFC would be over more quickly and we thought we could fix it on our own.
The GFC wasn’t really a global crisis. This time the crisis truly is global, and it’s more important that we get it right.
Central banks are less relevant in the pandemic because this is not a banking crisis. Thus far, policy response has broadly been viewed in a favourable light. Going forward policy may be less popular which will provide a significant challenge. Central banks will be concerned about the potential for stagflation
Do we really need the government to play a bigger role? The private sector has been remarkable throughout the crisis and they should not be taxed out of existence or prosperity to pay for the stimulus measures.
James
This is the most difficult investing period of my 30-year career because there is so much uncertainty. Monetary policy is a blunt instrument and has probably reached its peak effectiveness. This contributes to significant policy risk.
We shouldn’t be debating MMT, we should be debating the governance around it.
It is easy to talk about building a portfolio that is resilient enough to withstand any environment but this is getting harder and harder.
Given that many defensive assets don’t earn a sufficient return, balancing portfolio resilience and return can be problematic.
Olivier
There is much cause for pessimism:
Asset classes are exhausted and expensive in part because our frame of thinking is outdated.
Trust between nations is one of the most problematic issues.
We have realised that we have been short-changed by China.
We will have to choose between the US (who are letting us down) and China (who will not be a better master than the US).
Civil unrest continues and populism remains to be about me, me and I.
The EU suffered through the GFC (even though it started in the US) and also through COVID-19 (even though it started in Asia).
The Florida State Board of Administration has made some strategic moves to take advantage of opportunities in the dislocation, including in private equity, distressed debt and active listed equities.. But CIO, Ash Williams, is concerned about the underlying real economy.
Political regimes around the world are stuck in a series of dead-ends and despair. Most importantly, the China-US relationship has hit a brick wall as their fundamentally different values and interests clash. Deterrents and robust policy is the only way forward, says Stephen Kotkin, professor in history and international affairs, Princeton University.
Nobel prize winner Esther Duflo suggests institutional investors can help alleviate poverty by fostering new supply chains and looking beyond a country's credit rating. She said there is an "unacceptable" level of poverty amongst Africa Americans and Latinos who are keeping the US economy going but dying for it.
Global asset manager Robeco has found proactive stewardship triggers important changes in corporate behaviour. Chief executive Gilbert van Hassel urges FIS 2020 Digital delegates to do the same.
In a fireside chat, CIO of CalPERS Ben Meng talks about how the fund wants to use leverage to push deeper into private assets, while Ronald Wuijster, chief executive officer, APG Asset Management said the policy response has made taking advantage of buying opportunities difficult.
Investors should use stewardship to encourage purposeful companies that provide long-term value by meeting the needs of multiple stakeholders and helping improve society. But what is a purposeful company?
Understanding the two policy making camps in China - one which is concerned about debt and one which is worried about a slowdown in growth - is key to understanding China's position in the global economy, says professor of finance at Peking University, Michael Pettis.
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