The Australian Super and Investment Conference, on the Gold Coast September 16-18, looked at options facing the investment committees of super funds post-crisis. A record attendance of trustees, fund executives, managers and consultants seemed to agree on at least one thing – the world has changed inexorably. GREG BRIGHT reports. The big picture medium-to-longterm direction for institutional investors needs to be with the emerging markets, and in particular China, but the detail of portfolio construction is not so clear. In a post-crisis investment world the big picture seems relatively easy to see. Several speakers at the Australian Super and Investment Conference in September spoke of the anticipation of a continued growth in emerging markets in general, and China in particular, and only subdued growth, if any, in most of the West, and the US in particular, over the next couple of years.

“People have underestimated how much China is growing,” said Lewis South, chief economist of Macquarie Funds Group. “The emerging economies are the new engines for global growth.” The structure of relative growth between the developed and the developing world had changed for a decade because of the crisis, said Michael Hasenstab, co-director and fixed interest portfolio manager for Franklin Templeton in the US. There would be multiple reserve currencies in future, not just the US dollar, and the renminbi (China) would be one of them, he said. And Patrice Conxicoeur, director of Asia Pacific and head of institutional business for HSBC Global Asset Management, said: “China offers excellent value for long-term investors, despite short-term market volatility.

The renminbi is the only currency which has remained stable through the crisis. The crisis is a golden opportunity for Chinese companies.” He added, however, that valuations were “stretching the friendship” while not yet being in “bubble territory”. On the other side of the new world order, Chris Wallis, a senior portfolio manager of Vaughan Nelson in the US, said the next major crisis was likely to be in the currency markets, brought about by potential defaults in developed world debt. “The US is bankrupt, “ he said. “The Government can’t repay its debts and will have to renegotiate them. About US$5 trillion has to be raised over the next 12 months to fund global deficits.” Wallis said that the investment industry was not prepared for a market with shifting macro-economic fundamentals. There was excessive diversification in each asset class and managers tended to rely on historical correlations.

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