So the World Economic Forum in Davos is over for another year, and politicians and business leaders alike have returned to the humdrum of their day to day lives running companies and governments. But what were the key takeaways for the international asset management industry from one of the most important international conferences on the calendar?
Several major names in the hedge funds industry were in evidence and were given prime time speaking slots.
George Soros spoke out against what he sees as the dangers of artificial intelligence and machine learning if the technology is used by repressive regimes to control political dissent. Last year he was on the attack against the efforts by Google and Facebook to, as he saw it, monopolize the Internet. It continues a wide ranging debate on how governments and companies harvest and use data for their own ends, and the role that AI will play in helping delivering new insights on that data.
The debate over data was kicked around by several speakers at Davos, but while they were happy to identify what they saw as a problem for the privacy of the data of the individual, there were few commentators able to come up with realistic solutions when so much of global economic expansion is coming to rely on the use of Big Data to create further efficiencies and improvements in quality of life (for example – the data that smart devices are regularly harvesting from families and households).
China was at the forefront of other fund management minds at Davos – Glenn Youngkin, co-CEO at Carlyle, was just one of the key note speakers who expressed worries about the state of the Chinese economy. While China’s vice president was on hand to reassure investors that a slowdown in China’s GDP growth to 6.6% in 2019 – effectively the slowest pace since 1990 – was nothing to worry about, fund managers have become used to having China in the background as a global economic momentum catalyst.
While no senior delegates were going to stick their heads out and predict a global recession outright, there was a general consensus that we will see an economic slowdown in 2019. This is not being helped by the ongoing US-China trade negotiations, with Mary Erdoes, CEO of JP Morgan Asset Management, telling Yahoo Finance that “if that gets any worse than it is already or doesn’t have a resolution, that could weigh heavily on markets.”
ESG investment trends have been creeping up the investment management agenda for some years now – I wrote in an early edition of The Hedge Fund Journal – more than a decade ago – that even hedge funds would have to embrace ESG if their investors got behind it – and responsible investment was widely discussed at Davos.
Has ESG now grown up and gone mainstream? François Riahi, CEO of Natixis, seemed to think so. At a dinner hosted by Corporate Knights in Davos he said Natixis has introduced what he calls a ‘Green Weighting Factor ‘ – essentially an additional criteria that will influence lending decisions. This is already being employed in the world of development banking, where both banks and PE funds are using ESG criteria to assess the impact of their lending and investment activities.
With an increasing focus globally on the impact of climate change, we will see banks and fund managers being more public about their activities in the ESG space. This gives them an opportunity to demonstrate to the world at large how the finance industry is acting responsibly, but also, given the importance of capital in further industrialisation, in farming, in urbanisation, indeed many of the key trends that are driving climate change in the first place, fund management is well positioned to make its influence felt immediately.
Stuart Fieldhouse, Director, Hawksmoor Partners