HK Summit Latest: BlackRock Says $4 Trillion in Sidelined Cash an Issue for Investors

Bloomberg News
·5 min read

(Bloomberg) -- Wall Street’s elite gathered for a second day in Hong Kong for the city’s annual financial summit to discuss topics ranging from risks to China and investing.

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Wednesday’s speakers included the heads of Capital Group, Fidelity International and Hillhouse. The conference was conceived last year to restore confidence in Hong Kong after years of Covid restrictions and a tightening political climate raised questions about the city’s viability as the region’s premier financial hub.

(All times are HK time)

Executives Blast Hedge Fund Platform Model (3:07 p.m.)

Hedge fund executives including Paul Marshall of Marshall Wace and Chris Gradel of PAG blasted the so-called platforms whose hefty payouts have fueled a talent war in the global industry.

While on some levels justified, the business model has led to a “merry-go-around” where new recruits stay for only two or three years before being fired and then turn up at rivals, said Marshall, co-founder of the $59 billion investment firm.

PAG has seen some employees of its hedge fund platform business poached by rivals with eight-digits sign-on bonuses, said Gradel, chief executive officer of the Hong Kong-based alternative manager overseeing $53 billion of assets, describing it as “absolutely insanity.” PAG is a part owner of Polymer Capital Management.

“I think this is a temporary phase. It is a very bad phase,” he added. “It’s not good for the clients. It’s not good for the industry.”

Best Years Seen for Asia Private Equity (2:26 p.m.)

Hillhouse Chairman Zhang Lei said the next few years could produce the “best vintages for private equity” in Asia due to falling valuations that provide investors better bargains.

“The best companies are built in the worst, challenging times,” said Zhang, founder of the $80 billion investment house, adding that “you’re going to see the greatest companies in the making in this period of time.”

Even though Zhang’s portfolio companies are facing headwinds, he said the companies that improve on technology and align with suppliers and distributors can withstand the downturn.

GLP Says China’s 5% Growth is Real (11:22 a.m.)

China’s economic growth target of 5% is “real,” judging from an increase in trucking activity in recent months, according to the chief executive officer of logistics company GLP Pte.

The amount of goods moved by trucking operators since August has surpassed the 2019 pre-Covid level, although the data remains below the 2021 peak, GLP CEO and co-founder Ming Mei said at the forum.

China Is a Big Opportunity for BlackRock (9:32 a.m.)

China is experiencing a massive drive to diversify retirement savings away from real estate and deposits to other investments that are more capital-markets driven, so this is a big opportunity for BlackRock, said Senior Managing Director Mark Wiedman, the firm’s head of global client business.

“Cyclically, this is a difficult time in China,” Wiedman said on a panel about the macro landscape. “People talk about China like US-China tensions are the driver. It’s actually domestic policies, domestic investments that are the long-term opportunities in China.”

Capital Group’s new president and CEO Mike Gitlin said China is undergoing an economic transition that will take decades and investors should “lean into” areas which will most benefit from government policies.

US Deficit (9:27 a.m.)

BlackRock’s Wiedman said “no one’s paying attention” to the fiscal unsustainability of the US and that the risk isn’t priced into the markets.

“One morning, people are going to wake up and decide that this is one of the most important forces in global capital markets,” said Wiedman. “Yields will rise and every asset in the world will be repriced.”

Anne Richards, CEO of Fidelity International, said the US dollar’s status as a reserve currency relies on the good faith of global counterparts.

“Sometimes the US forgets that it relies on the kindness of strangers to keep the investments flowing towards its key markets in a way that it likes,” she said. “There is a moment — if the US doesn’t build that into policy — there will be chickens coming home to roost.”

Bonds Offer Window of Opportunity (9:12 a.m.)

There is a window of opportunity for investing in bonds if market assumptions that interest-rate hiking cycles are ending are accurate, said Capital Group’s Gitlin. If bond yields can reach 6% to 7%, that would be similar to most people’s long-term capital market assumptions for equities, he said.

$4 Trillion of Cash Is On The Sidelines (9:08 a.m.)

The huge pile of cash waiting on the sidelines is a major issue facing global investors as they figure out where capital is going, said BlackRock’s Wiedman.

“There’s about $4 trillion of cash that is sloshing around waiting for action,” he said. “We don’t know when that cash will come back in but that’s the first big overhang that clients talk about all the time.”

US Elections to Make Central Banks Cautious (9:00 am)

Central banks globally are going to be wary about doing anything drastic in a US election year, Fidelity’s Richards said. Interest rates will stay higher for longer, but are less likely to “have big jumps in either direction,” she said.

(An earlier version of this story corrected the spelling of “BlackRock.”)

--With assistance from Paul van Deventer, Joanne Wong, Harry Suhartono and Lulu Yilun Chen.

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