The explosion of populism that swept Donald Trump into the White House and triggered Brexit has made for the most worrying political climate in decades and greatly increased uncertainty for investors, the chief executive of Allianz Global Investors said.
Yet market volatility is historically low and asset prices are rising because the short-term outlook is positive thanks to ample central bank liquidity and the hunt for yield forcing investors to take on risk, Andreas Utermann told Reuters.
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Still, “I’m more worried now than I ever have been in my adult life, about us losing the liberal values I grew up with and passionately believe in,” Utermann told Reuters on the sidelines of a capital markets conference in Luxembourg.
“Do we have a neutral press in the UK or the US? No, of course we don’t. This constant need for equivalence (of viewpoints) is wrong, so wrong,” said Utermann, whose firm has 480 billion euros ($A711 billion) of assets under management and claims to be the largest active fund manager in the world.
Theresa May, U.K. prime minister, arrives in 10 Downing Street after meeting Queen Elizabeth II to mark the dissolution of parliament, beginning the formal start to campaigning for the June 8 general electio. Photo: Chris Ratcliffe
He said markets are unable to discount several years into the future, and so naturally focus on the short term.
Central banks are still pumping stimulus into the financial system even though the Federal Reserve is raising interest rates and the European Central Bank may soon consider when it will taper its bond purchases.
Bond buying so far this year has amounted to a “liquidity supernova” of more than $1 trillion, according to Bank of America Merrill Lynch.
But Utermann said that hasn’t prevented pockets of illiquidity in certain parts of the currency and fixed income markets, a trend exacerbated by the proliferation of trading platforms, increased regulation, and central bank asset purchases drying up the pool of available assets.
Andreas Utermann, chief executive officer and global chief investment officer at Allianz Global Investors AG, poses for a photograph following a Bloomberg Television interview in London, U.K., on Wednesday, May 3, 2017. Active management’s value proposition needs rethinking, Utermann said during the interview. Photographer: Simon Dawson/Bloomberg Photo: Simon Dawson
He said the uncertainty created by Britain’s vote last year to leave the European Union is unambiguously bad, but that it’s too early to say which sectors will be losers or emerge relatively unscathed.
“Uncertainty means it’s not a good thing, but you can’t do anything about it because we don’t know where the road is headed.”
AllianzGI wants its London operation to maintain access to the European single market, which would allow it to retain access to talent and clients across the continent. It is making the case to regulators and authorities that the asset management industry is a vital one.
“We feel that whatever they come up with in respect of the asset management business we can cope with. We assume there will be some cost and that’s obviously not good for our business, but there’s nothing much we can do about that,” he said.
“Rational minds will want the outcome that maximizes the economic benefits for all, and that is the status quo. But the politics of Brexit might get in the way of that,” Utermann said.
Despite the lack of clarity about what Brexit will ultimately mean for financial assets, markets and his industry, Utermann said AllianzGI hasn’t made any significant changes to its UK trading positions since the referendum in June last year.
AllianzGI’s London operation has grown in recent years and it has opened a new floor in its office in the city. Until there is more clarity on the terms of Brexit, AllianzGI is more likely to hire and expand in London rather than shift staff to its equally large offices in mainland Europe.
“For now, it’s business as usual,” he said.