The week in investor relations: Global economy faces increased risks, investors told to expect lower returns, and China’s ETF market on the up
– The Organisation for Economic Co-operation and Development (OECD) says risks to the global economy have increased, reported the BBC. The organization predicts continued global growth of 3 percent per year but says issues such as a lack of co-ordinated action on climate change are hurting investment. ‘Without a clear sense of direction on carbon prices, standards and regulation, and without the necessary public investment, businesses will put off investment decisions, with dire consequences for growth and employment,’ said the OECD.
– Investors may need to make more bets on stocks to earn their desired returns over the next decade, according to a new report from UBS. The report, covered in a news story by CNBC, says the next 10 years will see lower returns and higher volatility for the majority of financial assets. Investors ‘may therefore need to increase their allocation to riskier assets such as equities,’ said Mark Haefele, chief investment officer of UBS Global Wealth Management, in the report. UBS also predicts that wealth redistribution policies could become more popular in the US given growing wealth inequality.
– China’s ETF market is growing rapidly and could overtake Japan’s in the next five years, according to an article by Reuters. Philippe El-Asmar, head of Asia beta strategies at JPMorgan Asset Management, predicts the current market size of $100 bn will grow five-fold in five years to $500 bn, while Japan’s market currently stands at $300 bn. In China, ETFs are growing in appeal to both institutional and retail investors, while US passive fund giant Vanguard formed a joint venture with Chinese firm Ant in June.
– The UK’s Labour Party plans to impose a windfall tax on oil and gas companies if it wins next month’s general election, part of ‘the most radical Labour manifesto in decades,’ reported the Guardian. The party says it would raise £11 bn ($14 bn) from the tax and use the proceeds to help the country respond to climate change – for example, by retraining oil and gas workers. The proposals also include a financial transactions tax with the aim of raising £9 bn a year.
– Charles Schwab is in talks to buy TD Ameritrade, reported the Wall Street Journal. The deal would reshape the discount brokerage market given that the two firms are such major players in where retail investors buy and sell shares. The retail brokerage industry has had to contend with lower and lower fees in a bid to retain clients and attract new ones, encouraging firms to think about consolidation.