I was delighted to open this year’s LGIM Investment Conference. It focused on all aspects of the future, but the most unanticipated insights often came from our amazing audience.
We are clearly living in a period of tremendous change in virtually all aspects of society, and there is a lot of tension and uncertainty – not least for us in the business of stewarding customers’ hard-earned capital. Political risk and the market fluctuations it can cause cannot be avoided but it can be managed. We learned a lot about this listening to veteran BBC broadcaster Nick Robinson who spoke about the latest developments in the Brexit negotiations.
It is on us to manage these risks whilst continuing to generate sustainable, long-term performance to meet our clients’ needs. With that in mind, we polled our attendees throughout the conference with a series of questions which often yielded some surprising results!
1. Monetary policy will drive the next downturn
Our Chief Investment Officer Anton Eser and new Deputy Chief Investment Officer Sonja Laud talked us all through the effect quantitative easing (QE) programmes have had in driving the ‘wrong type of inflation’ – asset prices rather than wage growth or broader economic growth. Unlike other periods of economic recovery, equity markets have been driven by price-to-earnings (P/E) multiple expansion, and less by earnings themselves, but this seems unlikely to continue. By only a small margin, the audience believe that it is the consequences of the reversal of QE which are most likely to drive the next downturn.
2. Artificial intelligence and robotics will be more transformative than the internet
We continuously assess shifts in politics and policy alongside the other long-term themes that are dramatically changing the world in which we live, such as automation and the energy revolution. Dr Illah Nourbakhsh, Professor of Robotics at Carnegie Mellon University showed how stunning advances in technology are improving prosthetics, monitoring air quality outside of schools and predicting a McDonalds order on the basis of your car model!
In a breakout session led by EMEA CEO and Managing Partner of ROBO Global, Richard Lightbound, he explained how the robotics revolution is happening now across even the unlikeliest of sectors with many of the largest financial and social goals still ahead of us. Following these presentations, attendees voted three-to-one that this theme will be more transformative than the internet.
3. The future of allocations is largely active – for now
The shift to individual responsibility for retirement income is creating many challenges for all of us, driving demand for more choices and even better solutions. It seems as though the old investment style debates of active versus passive and tactical versus strategic will be back with a vengeance as 2019 gets underway.
As unpopular as it may sound, the response to climate change may require the global economy to move to a model based less on 'relentless growth'. But can we wean ourselves off consumption?