Anne Richards
CEO, Fidelity International
“Negative bond yields are now of systemic concern. With central bank rates at their lowest levels and U.S. Treasuries at their richest valuations in 100 years, we appear to be close to bubble territory, but we don’t know how or when this bubble will burst. Central banks are under great pressure to support risk assets and risk sentiment, regardless of potential moral hazard. The eventual reversal of the continued downward trend in rates and yields could have highly disruptive ramifications—this is one reason that central banks including the U.S. Federal Reserve and the [European Central Bank] have backtracked on hiking rates several times since the GFC [global financial crisis].
“Another area of concern is liquidity. The frictionless flow of capital around the world is subject to increasing barriers. Examples such as the U.S.-China trade war and the EU-Swiss spat over the trading of listed securities show that political disagreements are spilling over into capital and trade restrictions. As capital becomes less free-flowing and confined to smaller pools, it will weaken the ability of the financial system to respond dynamically to unforeseen liquidity events, such as an unexpected counterparty failure.
“This is the time to be an active manager who can dynamically monitor and adjust for potential systemic risks. We meet regularly to review our macro positioning and are focusing on quality in our stock and credit selection, leaning on our strength in fundamental, bottom- up corporate research. We are diversifying among styles, sectors, and regions, and are drawing on our ability to trade in different jurisdictions and time zones and ensuring the maturity of investment and borrowings are appropriately matched.”
David Herro
Deputy Chairman, Harris Associates
“Any move—whether it be election results or other political actions—to cripple free-market capitalism and private property rights is the biggest risk. As an investor, the solution, as always, is to seek the highest-quality businesses and the lowest valuations.”
Axel Weber
Chairman, UBS Group AG
“I see a high number of risks in 2020. For example: the trade conflict between the U.S. and China, the Middle East conflict, Brexit, U.S. elections, or more generally a deepening of current economic weakness around the globe. However, it’s not these risks per se that worry me the most. Such downside risks are known challenges for which one can prepare. What worries me more is the unprecedented level of uncertainty associated with these risks. For example, I worry about the potential adverse consequences of a reversal of globalization, the side effects of the extraordinarily accommodative monetary policy of the last 10 years on financial and monetary stability, or the potential systemic consequences of cyberattacks. As a bank, we have to be aware and prepared for such risks in highly uncertain times. This is why we feel comfortable with our regionally and divisionally diversified businesses. It allows us to manage our risk exposure prudently and our financial resources responsibly.”
Andreas Utermann
CEO, Allianz Global Investors
“One: Continued fragmentation of the neoliberal world order. For most of the postwar era, the world has benefited enormously from freer trade and less impeded capital flows. The winners clearly outnumbered the losers. It must be hoped that growing trade frictions do not end up shrinking the pie, making redistribution toward the losers of globalization more difficult, in turn further radicalizing politics.