I feel a touch fortunate that my Davos debut has come during such a fascinating period of change. The World Economic Forum’s annual gathering in Switzerland, which ends today, has long opined on the state of political, social and economic affairs. Discussions this week have seemed to possess an elevated sense of urgency.
At the macro level, global growth has to be re-invigorated, with the wealth created distributed more evenly. Meanwhile, rampant technological innovation is impacting everyone and the onus is on leaders to ensure that the power of this “fourth industrial revolution” is managed for societal gain.
Of course, attendees have also been busy digesting the implications of the UK’s decision to leave the European Union and of Donald Trump’s unlikely victory in the US presidential elections, as well as the ongoing dislocation in traditional political and social structures that helped produce these two unexpected outcomes.
While a lot of the discussion has taken place informally in the bars and restaurants of Davos, I was drawn towards some of the topics on the official programme, from the future of innovation and sustainable development, to childhood education, artificial intelligence and how to land monetary policy safely.
One of the over-arching themes of Davos this year is the “responsive leadership” necessary to grapple with these fundamental issues. Every business delegate needs to head home today with a clearer sense of how they plan to integrate this “call to arms” into their day job to improve company performance.
I believe that the asset management industry is key to delivering responsive leadership and needs to rise to the challenge.
The UK industry alone has £5.7 trillion in assets under management. So there is much my own sector can do to help close the divides that exist.
Fundamentally, we are in the business of looking after other people’s hard-earned money – a responsibility that we take very seriously. We need to manage it shrewdly and treat our customers fairly.
Much of what we manage is invested in bonds and shares issued by companies. If company management do not treat their stakeholders fairly, from employees and customers, through to suppliers and shareholders, we need to make sure that they know we won’t stand for it. It is in the long-term interests of both companies and investors that good governance is promoted as it contributes to long-term performance.
Long-term institutional investors like us can also use their patient capital to help to fund the infrastructure improvements needed to improve the quality of opportunity for all citizens.
The government’s forthcoming white paper on housing is an opportunity to help foster long-term, institutional investment in the UK’s residential rental market. It is long overdue. We have committed to invest £500m in the sector but there is plenty more willing capital waiting in the wings.
Perhaps the biggest challenge for asset managers though is how we can help to address the demographic and savings crisis. Many parts of the world are facing the prospect of an ageing population. The European Commission’s Ageing Report in 2015 forecast that the ratio of workers to pensioners on the continent will fall by half over the next 45 years, from four workers to one pensioner to two workers to one pensioner.
In the UK, one in three babies born today are projected to reach their hundredth birthday. People aged 85-plus represent the fastest growing segment of the UK population.
Asset managers need to help savers sweat their pension pots in retirement, so they receive a regular income but also have sufficient funds available to pay for healthcare and nursing home fees.
At the other end of the age spectrum, asset managers need to look at ways to encourage young people to save. Those entering the labour market today cannot be certain to receive a state pension when they retire, given government finances.
The onus is on them to accrue the funds required for their retirement. This at a time when wage growth is muted, university loans need to be repaid and the size of the deposit required for mortgages is ever increasing.
We need to respond to this challenge by offering clients fit-for-purpose and value-for-money investment vehicles for both the pre and post retirement markets. At the same time, we need to work with government and employers to help provide the personal finance education that is so desperately needed.
Only by working with all of our stakeholders can we help provide the responsive and responsible leadership that is required.