Asset Owners Adjust Investment Strategies
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BARINGS REAL ESTATE We’ve learned over the last 25 years that it takes experience and perspective to navigate through uncertain times. At Barings Real Estate, we harness the full breadth and depth of our $40+ billion real estate platform* to deliver our clients a more complete picture of the opportunities ahead, and the solutions designed to capitalize on them. Global Public Investors – central banks, sovereign funds and public pensions funds – are widening their radius ever further. The policies of 750 institutions with worldwide investible assets of $39.5tn have a profound effect on global markets. They are crucially important for growth prospects, the investment climate and capital markets. They will have a significant role in the post-pandemic global recovery. The 2020 annual edition, the seventh, surveys GPIs’ performance and practices across a wide range of investments as well as their activities in the digital economy and sustainable finance. 4 GPI 2020 Research Henry Wynter, Head of Strategic Danae Kyriakopoulou Partnerships Chief Economist & Director of [email protected] Research Patricia Haas Cleveland, President, [email protected] US Operations [email protected] Published by OMFIF Ltd Kat Usita Official Monetary and Financial Deputy Head of Research Meetings Institutions Forum [email protected] Marcin Stepan, Head of Programming 30 Crown Place, London EC2A 4EB Bhavin Patel [email protected] T: +44 (0)20 3008 5262 Senior Economist & Head of Rein de Loor, Programmes Manager, F: +44 (0)20 7965 4489 Fintech Research Americas 20 McCallum Street, #19-01 Tokio [email protected] [email protected] Marine Centre, Singapore, 069046 Pierre Ortlieb, Economist Ellie Groves, Programmes Manager, T: + 65 6823 8237 [email protected] Europe omfif.org Chris Papadopoullos, Economist [email protected] @omfif.org [email protected] Katie-Ann Wilson, Programmes Company Number: 7032533 Brandon Chye, Economist Manager, Emerging Markets [email protected] [email protected] Angelia Lee, Programmes Manager Production [email protected] Simon Hadley, Director, Production Ben Rands, Head of Logistics With a presence in London, Julie Levy-Abegnoli, Fergus [email protected] McKeown, Subeditors Singapore, Washington and New Sasha Stileman, Logistics co-ordinator York, OMFIF is an independent William Coningsby-Brown, [email protected] forum for central banking, Assistant Production Editor economic policy and public Marketing investment — a neutral platform James Fitzgerald, Marketing Manager Board for best practice in worldwide [email protected] David Marsh, Chairman public-private sector exchanges. Stefan Berci, Communications Manager [email protected] John Orchard, Chief Executive Officer For more information visit Phil Middleton, Deputy Chairman omfif.org or email enquiries@ Commercial omfif.org Chris Ostrowski, Commercial Director Maggie Mills [email protected] Jai Arya Mark Burgess Acknowledgments Edward Longhurst-Pierce, Director, Official Institutions & External OMFIF thanks officials from Relations Advisory Council the co-operating countries and [email protected] Meghnad Desai, Chairman cities for this publication, which Sofia Melis, Head OMFIF US Mark Sobel, US Chairman will be joining us in launch [email protected] Hani Kablawi, Deputy Chairman partnerships around the world. Mingiyan Shalkhakov, Relationship We are grateful to many other Frank Scheidig, Deputy Chairman Manager Xiang Songzuo, Deputy Chairman associates and colleagues for [email protected] their assistance and guidance. Otaviano Canuto, Aslihan Gedik, Shuen Lam, Commercial Partnership Robert Johnson,William Keegan, Manager John Kornblum, Norman Lamont, [email protected] Illustrations by Kingsley Moghalu, Louis de EleanorShakespeare Operations Montpellier, Fabrizio Saccomanni, @eshakespeare Sarah Holmes, Chief Operating Officer Gary Smith, Niels Thygesen, Ted [email protected] Truman, Marsha Vande Berg. Adam Cotter, Director & Head of Asia Ben Shenglin, Chair, OMFIF [email protected] Economists Network © OMFIF Ltd 2020. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without the prior permission of the publisher. The views and opinions expressed by the authors and contributors to this publication are provided in the writers’ personal and professional capacities and represent their responsibility. The publication does not imply that their contributions represent the views or opinions of OMFIF and must neither be regarded as constituting advice on any matter, nor be interpreted as such. The reproduction of advertisements in this publication does not in any way imply endorsement by OMFIF of products or services referred to therein. While every care is taken to provide accurate information, the publisher cannot accept liability for any errors or omissions. No responsibility will be accepted for any loss occurred by any individual due to acting or not acting as a result of any content in this publication. On any specific matter reference should be made to an appropriate adviser. OMFIF.ORG WELCOME 5 ‘Thin line between success GPIs’ role in shaping policy is fraught with hazard, writes and failure’ David Marsh, chairman, OMFIF of policy. Governments are demonstrating presence and prowess to counter Covid-19. With their growing firepower, GPIs are in the public eye. But they cannot lose sight of parallel vulnerabilities. Central banks, through further shifts towards THE 2008 financial crisis thrust central banks, still more unconventional monetary policy, have sovereign funds and public pension funds into the greatly expanded balance sheets and represent limelight. Massive stabilisation efforts ensued, the mainspring of global recovery. However, if including central banking packages and bail-outs of the upturn is slower than expected, or if the virus stock market-quoted groups. With the rapid outbreak returns with fresh virulence, they will face vast 12 years later of still more pernicious economic and financial and reputational exposure. With this will social disturbance, state institutions are marshalling come a backlash from politicians claiming they an even greater display of force spreading well misused their independence and leverage. beyond the purely financial. Global Public Investor Sovereign funds have been ultra-active – both in 2020 covers all aspects of these institutions’ make- buttressing their own governments’ rescue measures up and performance. We focus on their fostering and through opportunistic investments in sectors of institutional resilience in the face of the biggest expected to profit from the turbulence. In some international crisis since the second world war. And senses against their better judgement, they are we multiply references to the need for economic making wagers on the future of the world economy and financial sustainability, a major theme over the from which they would normally shrink back. seven years of our annual series. Coming years will show whether these choices have The world could manifestly no longer proceed as been master strokes or miscalculations. it was developing last year, in apparent comfort but Public pension funds have been shoring up increasing precariousness. A year ago, in the GPI incomes and valuations – for workers, retirees and 2019 foreword, I wrote, ‘The much-heralded world investors a pivotal form of life support. But if their recession is nowhere in sight, but history teaches investment processes or governance frameworks that it may be just over the horizon.’ Now it has break down, stabilisation will go into reverse. For arrived, GPIs are no longer mere instruments. In all these institutions and the people and businesses many cases – in the absence of broader international they support, the threshold to fresh travail is strategies, occasioned by the US retreat from global low – and the line between success and failure is leadership – they have become source and bedrock agonisingly thin. 6 GPI 2020 CONTENTS 1 Forewords Macro environment Opportunities ahead for those willing 9 to embrace them shaping GPI activities Gerry Grimstone, UK Department for International Trade Chapter 1 Intensified interlinkages, search for 9 alignment A new world economy Danae Kyriakopoulou, OMFIF When Covid-19 struck, governments 26 introduced fiscal policy measures. Swift monetary policy action complemented this Report findings Sharon Donnery, Central Bank of Ireland Coronavirus will reverse low demand 27 Executive summary policies of the 2010s Weighing safety and risk 10 Chris Papadopoullos This is a challenging environment 33 for yield-seeking investors Top 10 findings James Blair, Capital Group Equities and gold buoy GPI holdings 12 Europe recovery boosts overall growth 13 Five GPIs responsible for almost 14 Chapter 2 one-third of total asset growth Evolving currency system US bull market widens imbalance 15 Relationship between dollar rates 36 Flight to safety complicates low yields... 16 and economic fundamentals evolving Dubravko Mihaljek, Bank for International ...with risk assets set to benefit 17 Settlements Faith in core currencies during crisis 18 Central bank digital currencies unlikely 37 Little appetite for sovereign digital 19 to dethrone the dollar currency basket Pierre Ortlieb and Bhavin Patel Push