Recently, the CEO of Alliance Investors commented publicly that the recent Brexit and the state of the populous that lead to placing Donald Trump in the White House are both causing uncertainty and worry for investors.
Asset prices are rising rapidly, and yet when you look at the market volatility, it's still historically low. One of the reasons why such phenomenon is occurring is because central banks are increasing liquidity, which encourages investors to take on more risk in response to the Brexit and Trump situation. This is according to Andreas Utermann.
Andreas Utermann added that he is now more worried than he has ever been in his adult life. This is something that is particularly noteworthy in this case, especially when considering that Utermann manages $48 billion in assets.
Utermann is worried that short-term insights are what drive today's market movements. For example, central banks are continuously pumping stimulus into the system, while some governments are thinking of tapering bond purchases (e.g. European Central Bank). It is worth mentioning that the bond market is experiencing a "liquidity supernova" in excess of $1 trillion right now. This is according to Bank of America Merrill Lynch. And yet even then, there are still pockets of negative cash flow found in fixed income brackets and some parts within the currency markets. These pockets continue to grow due to massive purchases of assets by the central banks, increased regulation, and growth of trading platforms.
Then, there is the issue of Brexit. According to Utermann, Brexit was an economic disaster, and there's no question about it. However, it's too early to tell which sectors will be left unscathed and which sectors are going to suffer.
Utermann added that uncertainty is not a good thing for investors. Furthermore, investors can't do anything about it as no one knows where the road is headed.
AllianzGI is now making a case for authorities and regulators as to why the asset management industry is critical.
Utermann admitted that there would be upcoming changes which will cost their business in some way or another. However in the end, they can do little about it as the asset management industry will simply have to cope with the changes.
Utermann added that rational minds would want something that would maximize the economic benefits for all participants. However, there is a big possibility that politics within and surrounding the Brexit will get in the way of such goal.
Despite being in distressing amounts of uncertainty over Brexit and how it will affect the asset management industry, AllianzGI is not making any major changes when it comes to their UK trading positions. This is according to a referendum made that is going to be released in June.
AllianzGI's operations in London experienced a steady growth these past years. In fact, the company opened new floors within the city. At the moment, the company's plan is to continue the growth until the waters clear up a little and the Brexit situation indicates that they should be shifting gears.