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13th December 2011

Long term investment move away from Equities
Trend

A thought provoking McKinsey article argues that the major change in where savings are generated geographically and wealth markets are growing fastest will have a profound effect on the mix of assets held by investors. The report focuses first on the fact that much of the savings generated globally comes from emerging markets and large growth in the wealth market is also occurring in the same countries. These households like to keep three quarters of their assets on deposit as opposed to developed country where investors prefer 30-40% to be in equities.


This is relevant because during the last decade global financial wealth in emerging markets increased from 7% to 21% and by the end of the current decade is anticipated to be as large as that in the developed nations.


McKinsey concludes:
"While the use of equities in developing economies to finance growth and build savings is increasing, this evolution is taking place slowly. The likely result: a shift in the global allocation of financial assets toward deposits and fixed-income instruments and away from equities in this decade. This shift is being exacerbated by aging and other trends in the developed world that are dampening investor appetite for equities. As a result, equities could decline from 28 percent of global financial assets in 2010 to 22 percent in 2020."


The article can be found at:

https://www.mckinseyquarterly.com/Economic_Studies/Country_Reports/How_the_role_of_equities_may_shrink_2898
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