The Bid Under the Market?
Shadowy hedge funds have been gaining prominence since the late 80’s. But shadowy sovereign wealth funds are just starting to create a stir, and the fees they will generate over the next decade could bolster some of the boutique asset managment shops around the Street and in the City of London. Don’t look for the likes a Legg Mason to garner the assets, but some of the lesser known alternative shops might have a crack at the flows:
If the rise of these funds is as spectacular as anticipated in the estimates currently doing the rounds—and if rich nations keep up the pressure on these mostly opaque institutions to become more transparent—the private-sector fund-management industry could expect billions of dollars in additional revenue.
In fact, the longer it takes for the U.S. current-account deficit to narrow—and the harder China resists the currency appreciation that a weakening dollar entails—the bigger may be the payoff for the global asset-management industry.
Analysts can’t agree on the numbers. No one knows for sure just how large Asian and Middle Eastern sovereign wealth funds will become in the coming years. Or, for that matter, how big they already are. Bloomberg
The guesstimates are rolling in, and the numbers are staggering. Blogs who recommended selling in August because of “redemption day” on August 15th might want to plug these numbers into their models:
According to Morgan Stanley economist Stephen Jen’s estimates, foreign-currency assets held by nation states—minus central banks’ official reserves—will swell to $12 trillion by 2015, from about $2.5 trillion now.
Merrill Lynch & Co.’s forecast is for $7.9 trillion in 2011, compared with $1.9 trillion at present.
Standard Chartered Plc Chief Economist Gerard Lyons reckons these funds will have $13.4 trillion in assets within a decade, a sixfold increase from the current level of $2.2 trillion.
Job losses will rock Wall Street between now and the end of the year. But if unemployed fixed-income professionals can reinvent themselves as commodity traders to take advantage of the job market, idle sellside folks might want to think about taking a stroll to the buyside, assuming these numbers are accurate.
Global asset managers can potentially make as much as $8 billion a year in additional revenue from managing sovereign wealth funds, the Merrill study says.
That’s thousands of new jobs every year for money managers and analysts.
Big numbers indeed. If might even benefit the sagging shares of professional recruiters at some point. They could certainly use some help, given the weakness in their financial practice segments.
Sovereign Funds Bring Political Leverage, Jobs: Andy Mukherjee
Bloomberg
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
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