Key Investment Themes for 2011
As noted in our 2011 Investment Outlook: Redrawing the map, the power of globalisation remains as intense as ever.The positive trends of fiscal balance, growth, savings, rising living standards and favourable demographics have all moved east to favour Asia and the emerging world, leaving the West hampered by austerity.
The implication of this change in economic leadership is significant for investors in hedge funds and other alternatives, which prior to 2008 enjoyed a golden age of returns, revved up by falling interest rates and abundant credit. Many of these asset classes have since been nursing a hangover from excessive leverage, but we see good evidence that the hedge-fund industry has recovered. It has also developed in ways that offer investors greater transparency and a wider choice of routes to market, a theme explored in more detail in this document.
New Era
To be sure, one of the truths of the new era is that the starting point for setting sustainable, long-term return expectations should be more modest, anchored in single digits – this is what we expect from developed equity markets, for example. The challenge is to identify a new universe of opportunities that can deliver higher returns based this time on growth, productivity and an appropriate risk premium, rather than primarily reliant on leverage. We view this as a sound starting point from which to explore strategies and opportunities for investing to preserve and enhance wealth, which is at the heart of our investment proposition and is the focus of this document.
