US energy, Latin America and performance statistics are among the topics commented on by fund and asset selectors in this latest round-up of views.
PRIVATE EQUITY PUSH
Name: Alejandro Rodriguez
Title: Senior associate
Base: Mexico City
How is the environment for investing in private equity in Latin America at present?
What we see in Latin America today is a result of more than a decade's improvement of the framework for investing in private markets, as well as a more stable macroeconomic environment.
At both government and company level, you have better capitalised capital structures, and growth. We see changes in consumption habits of the middle classes are driving most of the growth.
The sectors that we think will benefit from this will be housing and basic financial services, private education and retail consumption.
We also like infrastructure, but we are not targeting larger projects, rather the companies that benefit from the large projects, such as logistics, services for oil and gas companies and port development.
We recognise that Brazil is not the only place with private equity opportunities in Latin America. We try to find opportunities outside Brazil as well. PineBridge's $6bn fund of private equity funds portfolio holds investments in 325 funds.
USA: FUTURE ENERGY POWERHOUSE
Name: Marco Pabst
Title: CIO Wealth Management
What do you think about the US heading towards net-energy-exporter status?
The US has to satisfy about 20% of its energy demand through imports. Oil dependency is much higher - in the 1990s, it imported two thirds of its oil, though this number has fallen to a staggering 50% [but] by the end of this decade the US could become a net exporter of energy.
Net oil imports of ten million barrels per day at current prices would explain $400bn of the US trade deficit. While temporary trade deficits are not harmful, sustained deficits cause major global imbalances, massive surpluses and a strong currency on one side, and the exact opposite on the other. Difficult political relationships such as those with Saudi Arabia ensue, which have various implications for the relationship with other third parties.
[With net exports] the trade deficit would be greatly reduced, if not eliminated, with positive effect on the dollar and help to better balance the global economy. More domestically-sourced energy would lead to less reliance on politically fragile countries. US foreign policy could become less confrontational, with cost savings for defence spending.
WEIGHT CHANGE IN EQUITIES
Name: Laurenz Czempiel
Title: Member of the executive board
Company: Donner & Reuschel
What is needed to allow private clients to invest more effectively in equities again?
In the past, private clients saw the equity market mainly go up, thus obtaining substantial capital gains from their investments. But they neglected the increased risk due to higher allocations to the stock markets.
Today, however, private and institutional investors are tired of equities going up then back down. If you look at five-year returns that are negative, many clients might ask ‘Why should I have the heart attacks of investing only in an equity fund?' What is needed is a mechanism to manage the overall risk of portfolios by changing weightings of assets more rapidly and investing globally in different asset classes. But when you look at the industry, you see most people do not do that.