Geopolitical Risks Take Centre Stage at the International Pension Conference of Montréal
MONTRÉAL - Faced with ongoing challenges in the current investment environment, institutional investors must place more importance on political risks, according to a group of leading geopolitical and financial experts speaking on Monday June 12 at the fifth edition of the International Pension Conference of Montréal (IPCM).
After years of increased international cooperation and correlated markets, Lisa Emsbo-Mattingly, Director of Asset Allocation Research at Fidelity Investments, believes the appetite for globalization has peaked and investors may be ignoring the risks ahead.
"Market volatility has remained low despite the significant increase in political risk over the past two years," said Lisa Emsbo-Mattingly. "In fact, the gap between political uncertainty and market volatility is the widest it has been since 2000."
Philip Stevens, Chief Political Commentator for the Financial Times, sees three major trends that will shape the world over the coming years: a continued decline in the United States' global influence, China's determination to become a superpower via closer ties with Europe, and the rise of populism in developed markets.
"We are moving into a multipolar world where the United States' power is in relative decline which will lead to a more unstable environment," said Marko Papic, Senior Vice President, Geopolitical Strategy at BCA Research. "Already the number of conflicts occurring today in the world is already the highest it has been since 2010."
Jean Raby, Chief Executive Officer of Natixis Global Asset Management, mentioned that when dealing with geopolitical risks, "It is extremely difficult to gauge political outcomes. Even when you predict the correct outcome, you might anticipate the wrong consequence."
Paul Podolsky, Partner with Bridgewater Associates, is concerned with the global wave of populism and the tremendous liquidity in markets, something that has not occurred since the late 1920s, when these trends led to unexpected changes in policy.
In a challenging investment environment with low inflation, low interest rates and high asset values, Henri-Paul Rousseau, Vice-Chairman, Power Corporation of Canada and Power Financial Corporation, said it would be a mistake not to take geopolitical risks into account when considering future investments. "While markets have historically been resilient to political shocks, it might no longer be the case in the current environment where geopolitical risks might have a greater impact on investment returns than in the past," he said.
Taking place at Montreal's Hotel Bonaventure under the auspices of the Conference of Montréal, the IPCM advances the debate on pension issues and solutions around the world. It is a unique opportunity for policy makers, political advisers financial experts, actuaries and pension plan administrators to meet and exchanges ideas.