Introduction from Stephen Bird, CEO, Standard Life Aberdeen
Welcome to this summer 2021 edition of Global Outlook. We use this flagship publication to provide you with our latest thoughts, opinions and views on a range of investment, economic and political topics. I would like to use this issue to explain how our new strategic focus, which I set out in March this year, capitalizes on the investment trends we are seeing in the market.
These are turbulent times. The financial industry is under great pressure. But there are also myriad opportunities. Areas like infrastructure, technology, life sciences and the transition to a net-zero future are attracting support and major asset flows. In their Economic and Market Outlook, Richard Dunbar and Jeremy Lawson give an overview of our current investment thinking and house view.
One of the most exciting prospects for us is growth in Asia. This is hardly a new theme, but the global economy will continue gravitating toward the east. The region is forecasted to grow at around 4% per annum over the next five years, continuing to outpace the U.S. and EU. Within the decade, China is likely to overtake the U.S. as the world’s largest economy. Much of China’s growth will be powered by consumers. The power of Chinese consumers is really demonstrated during the recent Labor Day holidays and where the Chinese consumer leads, global consumers often follow. Nick Yeo looks at the spending patterns that could portend global trends.
Demographic challenges have perhaps moved away from front of mind over the last year. But they haven’t gone away. Our institutional, wholesale and insurance clients face challenges stemming from increasing longevity and mounting pension burdens. Companies and countries are transitioning to "net zero" to avert climate disaster — all this in an environment of sustained low-interest rates. So, more than ever, we’re intent on designing effective solutions that help our clients meet these complex needs.
We think that we can help meet these needs by developing client ecosystems. This is all about accessing new and growing customer segments through our partners in a digitally connected world. By doing this, we will be able to respond to the requirements of our clients with the right solutions at the right time.
One such solution is being developed via our partnership with China Construction Bank International. Together, we aim to provide clients with access to investment opportunities that will arise from China’s "One Belt, One Road" initiative. You can read more about the $26 trillion plan to build infrastructure linking Asia and Europe in Eric Bruce’s article.
Meanwhile, an increasing proportion of the solutions to our clients’ needs will come from private markets. We’re in a world of low expected returns from liquid assets. There are fewer public companies, and traditional assets don’t offer the scope for diversification they once did. In that environment, private market opportunities are increasingly important. We’re focused on growth themes that can be more easily accessed through private markets — whether real estate, equity or credit — and strengthening our teams accordingly. In the article by Gershon Cohen, we look in particular depth at infrastructure spending and the parts public and private sectors have to play in building a sustainable global recovery.
We also need to consider the big changes taking place in adviser and consumer markets. While this is a global issue, in the U.K. greater longevity, pension freedoms and intergenerational wealth transfer are increasingly important. They all call for sound investment advice. Yet an FCA study revealed that currently, only 8% of UK adults receive financial planning advice. Indeed, more than 20 million U.K. adults are unaware advice is available or are not being served by the marketplace. In their podcast, Rennie McConnochie and Richard Dunbar discuss some of the challenges stemming from the increasing "democratization" of the global savings market.
Technology is a vital enabler. Agile technology, advanced data analytics, machine learning and cloud computing are all essential capabilities for companies looking to achieve client-led growth. Our thematic investment approach is described in detail by Andy Brown.
It’s important to highlight that underpinning all of these strategic priorities is our commitment to ESG and responsible investing. Investors play a vital role in directing capital to those companies and ventures seeking to make tomorrow’s world better for everyone. Beth Meyer’s article highlights how we factor human rights into our investment process and the ways we engage with companies to make a difference to people.
These are challenging, yet exciting times for active managers. We will play a vital role in identifying opportunities for clients, providing the capital to help rebuild and reshape the post-pandemic recovery. And it’s also an exciting time for our business, with an evolved growth strategy and a new single digitally enabled brand, we use our expert insights to enable our clients to be better investors.