Conference Presentation, Panel
Global Capital Markets
Milken InstituteMichael Klowden, Michael Milken, Richard Byrne, Katherine Garret-Cox, Robert Kricheff, Brigitte Posch, Paul Taylor
- Global capital market success or failure is predicted to determine historical trajectories, with access to markets enabling individual flourishing where opportunity exists.
- A net outflow from emerging markets is expected this year, driven by potential Federal Reserve rate hikes that may provoke outflows from both non-resident and resident investors.
- Volatility in emerging markets is anticipated to persist due to lower global growth, slower growth in China, and a lack of positive catalysts for commodities.
- Future dynamics in emerging markets will depend on local savings rates; high savings in regions like the Middle East and Singapore may deepen domestic capital markets, while low savings in Brazil and sub-Saharan Africa will sustain dependence on non-resident financing.
- Opportunities in emerging markets are identified in currency, commodity, and export sectors, alongside companies that can navigate adjustment periods as export or import-oriented entities.
- European rates are expected to remain significantly lower than other regions, making the U.S. market more attractive for near-term investment opportunities.
- The Federal Reserve's impending actions are predicted to lower volatility after a period of market insecurity regarding their potential moves.
- Long-term economic outlooks include a projected increase of one billion people entering middle-income categories over the next five to ten years.
- Total institutionally managed investment funds are forecast to grow from $60 trillion to $100 trillion, creating massive needs for infrastructure spending totaling trillions of dollars globally.
- Regulatory frameworks in Europe currently face technical challenges that hinder development, whereas the evolution of regulatory and policy frameworks over the next five to seven years is deemed crucial for building local capital markets.
- Implementing regulations to develop local capital markets in emerging nations is expected to provide the greatest financial benefit in the coming years by balancing resident and non-resident investors.
- Potential policy changes under a hypothetical U.S. Treasury appointment include adjusting the regulatory regime between pre-2008 and current standards to encourage innovation, reducing the number of regulators, and simplifying the tax code to cut compliance complexity.
- A balanced regulatory approach is expected to encourage banks to re-enter emerging economies and place interesting assets on balance sheets, while a simpler tax code reduces industry compliance burdens.
- Specific investment strategies include targeting below investment grade debt, distressed bonds with U.S. default rates between 1.5% and 2% and lower rates in Europe, and utilizing convertibles to lower volatility.
- The Alliance Trust global equity portfolio aims to deliver returns exceeding mainstream benchmarks while emitting 70% less carbon than the benchmark.
- Portfolio structuring plans involve aligning with client philosophies on environmental or philanthropic goals and targeting a 7% to 8% long-term rate of return goal that encompasses purposes beyond financial return.
- Richer buying opportunities are expected to emerge in the U.S. due to market dispersion, whereas Europe remains in earlier stages of monetary policy adjustment.
- Financial inclusion, saving education, and demystifying investment are planned initiatives intended to reduce societal dependence on the state and improve financial safety in Europe and the UK.
- Opportunities are anticipated for banks to fill supply-demand gaps in asset classes they previously avoided due to regulation, and for capital markets to spur job creation and solve societal problems once regulatory anger subsides.