‘Once-in-a-decade’ events are becoming more and more common, but avoiding them altogether is just one way of protecting portfolios. ART is building new capabilities to absorb their impact – and come back from them even stronger.
With almost 50 per cent of its nearly $100 billion FUM now internally managed, Cbus has seen fees come down and gained more control over its ever-growing portfolio. But in hindsight it “could have pushed a bit harder”.
McKinsey’s Orr predicts some worrying themes for China
Gordon Orr, McKinsey’s long-time China watcher, is predicting a year of slowing growth, headaches for multinationals and demographic anxiety in China. He also predicting “buyer’s remorse” for soccer tycoons.
His annual report, ‘What Can we Expect in China in 2017′, assumes that the US will raise some tariffs on Chinese imports, such as steel and some agricultural goods, and that a few high-profile companies will have to choose between accommodating the demands of the Chinese or US government.
Orr, who is director emeritus and senior external advisor of McKinsey, says:
- Matching 2016’s economic growth will be a struggle … especially if exports and consumer spending are flat.
- Watch out if steel prices drop … which could happen if construction slows and overcapacity spikes.
- New laws create new risks … and more are likely if (when!) a major cybersecurity breach occurs.
- Where has the money gone? Despite the government’s efforts, currency keeps finding its way overseas.
- Where are the children? Their grandparents are lonely. The fertility rate is historically low, stifling economic activity.
- Depressed regions become more so … as urban migration continues, taking economic activity with it.
- Will commodities be the next hot asset class? Retail investors and hedge funds are flooding the sector.
- Auto industry accelerates into the future … and China become a global leader.
- Cheers turn to boos in European soccer stadiums … as investors realize it’s easier to buy a team than win championships.
Orr says: “With the caveat that everything is subject to change when it comes to geopolitics, I expect China’s government priorities this year to largely be domestic. Ensuring smooth government leadership transitions will take precedence over economic reform perceived as potentially risky. Actions to increase the control of the economy by the Party take precedence over market-based reforms.
“We will see incremental policy change, largely pushing on the same levers that worked for the government in 2016. But by the second half of 2017, we will see that consumer spending is not growing at the pace needed to deliver the promised GDP growth, leading to a further boost in debt-funded infrastructure spending and property construction and a bumpier second half of the year.”
