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Wednesday, May 1, 2019

"Global" Is the Word of the Day

Reported by Sean Hanna, Editor in Chief

"Global" is the word of the day among the top mutual fund executives gathered in the nation's capitol. George Gatch, CEO of J.P. Morgan Asset Management's Global Funds Management and Institutional businesses highlighted global opportunities for the fund industry as the main theme of his opening remarks at the Investment Company Institute's (ICI's) sixty-first annual General Membership Meeting (GMM) in Washington, D.C. Yie-Hsin Hung, CEO of New York Life Asset Management, pointed out in her opening remarks that attendees at this year's event hail from 21 countries on six continents. The afternoon closed with attendees hearing the creation story of China's e-commerce giant Alibaba from Joseph Tsai, one of sixteen co-founders of the firm.

Gatch called globalization "unstoppable" while making the case that U.S. fund firms are well positioned to benefit from the inevitable. In the 1980s, U.S. fund investors held just three percent of their portfolios in global strategies. Today that share is closer to 20 percent, according to Gatch. Yet he believes that Americans remain underinvested in global strategies. U.S. equities account for just half of world equity markets.

"We know from out experience that fund investing develops as an economy develops — the more incomes rise, the more a population demands the diversified, transparent, and cost-effective investing that fund provide," Gatch told attendees. "We'll see that demand increasing in India, China, Brazil, and many other countries."

Gatch foresees a growing demand for defined contribution-type program around the world as a key opportunity for US fund firms.

"... Pay-as-you-go pensions aren't going to be able to carry the strain of aging populations. More and more countries are looking at the model of defined contribution retirement savings — built on fund investing — that has helped American workers achieve a 600-percent increase in retirement assets per household, after inflation, since 1975," said Gatch.

NYLIM's Hung told attendees that "global thinking was once an option but is now a necessity." Today, she added, the "greatest risk in global markets is to ignore them."

She pointed to disparate rules among various countries and an impractical supervisory approach to fund regulation in some parts of the world as obstacles to fund firms efficiently expanding their resources globally.

"How will we adapt to the many Byzantine bureaucratic hierarchies and unfamiliar governance structures we are bound to encounter?," she asked. "And how will we manage the potential for friction in distribution arrangements?"

Oh, and for those wondering what the first item sold by Alibaba was ... "I don't remember. But I can tell you it was something out of one of our employees closets," admitted Tsai. 

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