Tony Robinson, Chief Strategist for Dutch hedge fund multi-manager Finles, outlines the case for allocating to Asia and Commodities.
The tectonic shifts in the world's investment outlook, created by accelerating globalisation, are still in their early stages and favour investors in absolute return funds focusing on Asia and commodities markets over the next year and long-term, according to Tony Robinson, Chief Strategist for Dutch hedge fund multi-manager Finles.
'Globalisation is generating a tectonic plate shift in the world economic and financial system order. Economic growth is shifting relentlessly from developed to developing countries and we are at the early stages of this shift,' Robinson told a recent gathering of Dutch institutional investors in Utrecht.
In addition to his roles as chief strategic advisor for innovative hedge fund investment boutique Finles, which was the first multi-manager to introduce the 'performance fee only' (Star Selector) fund in the Netherlands, Robinson is also the Managing Director of his own firm Invesdar Global Advisors, based in the UK, and advises a number of institutional investors. Between 1999 and 2005 Robinson was Chief Investment Officer for hedge fund investor Attica Investment Management.
Since 1985, the annual average GDP (gross domestic product) growth of emerging economies has increased to 7.5% from 3.0%, compared with a decline to 3% from 4% for developed economies over the same period.
Robinson said the previous contagious convulsions in the emerging markets such as the Asian economic crisis of 1997, or the Russian debt crisis of 1998, were likely to be events of the past. These countries foreign reserve positions and economic management are now far more robust than in previous economic cycles and their dependence on the U.S. economy is far less.
'So far, emerging stock markets have brushed aside corrections and periodic bouts of panic as we saw in February. I think in the future we're going to see far shorter and sharper corrections, but these should be looked at as buying opportunities in emerging markets. We won't get the drip feed bear markets of the 1970s and 1980s anymore,' he said.
Long-biased emerging market and Global Macro (which invest on the basis of major trends in markets such as commodities or currencies) hedge funds, with their nimble trading strategies, are well-placed to take advantage of this big picture in the intermediate and long-terms, he added.
Strong demand for raw materials, such as base metals and agricultural commodities, is closely linked to economic growth in the emerging markets and they are therefore presenting interesting investment opportunities.
'Commodity markets are nowhere near their peaks in real terms and are just taking off. There is a lot more to come,' Robinson said.
Another market which should be considered by investors is gold, which may benefit from moves by central banks in developing economies to diversify their foreign reserves away from the relentlessly declining U.S. dollar, he said.
China's gold reserves of 600 tonnes, make up just 1.2% of its total foreign reserves, compared with 8,133.5 tonnes and 74.3% for the United States. Global gold mine production is also declining by 2% a year.
'We are the start of a momentous change in the world economy. Income per head in just four countries (China, India, Brazil and South Korea) with 2.5 billion consumers is way below the developed nations, but they want to catch-up. Investors need to be positioning themselves for these major economic trends now,' Robinson concluded.