Allocating into a world of ‘megathreats’

If you believe Nouriel Roubini, the world is entering a new era. The market dislocations of the past few years are not just bumps on the road, but signs of systemic shifts in the global political economy.

‘Severe megathreats are imperilling our future – not just our jobs, incomes, wealth, and the global economy, but also the relative peace, prosperity and progress achieved over the past 75 years,’ Roubini wrote in Project Syndicate just a few weeks ago. He argued the world has got used to the prosperity of the post-WorldWar II era, but the coming years are more likely to ‘resemble the tumultuous and dark decades between 1914 and 1945’.

Whether or not he is right about the overall environment, there is no doubt that some of the potential disasters Roubini identifies, such as nuclear war or an environmental apocalypse, are now more likely than ever. Money managers are no longer allocating into a golden future. The risks have never been greater.

How are asset allocators navigating this landscape? What tools are they are using, and how are they trying to protect portfolios?

For this edition of our annual Star Selectors publication, we speak to leading South African fund buyers to reflect on how they, and the asset managers they deal with, have managed the past year’s changing market dynamics and how they are thinking about the future. What are the most important lessons they have learned, the key decisions they have made, and the biggest debates they have had?

I hope you enjoy their insights.