How many investors are currently available to you for cross-border impact investing?

Of over 120 million investors in the United States, only about 0.3 % are professional investors.

The total number of professional investors in the United States is in the neighborhood of 350,000. This includes approximately 300,000 active angels, 1,200 VC funds, 4,200 private equity firms and 6,000 family offices – and some 35,000 miscellaneous professional investors.

60 % of US households have retirement investments, 44 % invest in mutual funds, and 52 % of Americans invest in the stock market.

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Long cycles

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The pool of negative-yielding government bonds around the world hit a fresh record high of $13 trillion. In November 2016, that figure was $11 trillion.

Total US-domiciled assets under management using sustainable, responsible and impact investing strategies grew from $8.7 trillion at the start of 2016 to almost $12.0 trillion at the start of 2018. This represents 26 %—or 1 in 4 dollars—of the total US assets under professional management.

According to US SIF: The Forum for Sustainable and Responsible Investment, of the $11.6 trillion in assets, $8.6 trillion was managed on behalf of institutional investors and $3 trillion on behalf of individual investors.

The UN Sustainable Development Solutions Network values the total additional investment needed to achieve the Global Goals in all countries at $2.4 trillion a year, around 11% of annual global savings, with around $1.6 trillion needed for infrastructure.

Currently financial assets on Earth exceed $290 trillion and grow at 5% a year. Nearly $100 trillion is invested in pension funds, insurance companies and investment funds, including sovereign wealth funds.

Within the $290 trillion global financial markets, there are hundreds of new risks, pools of potentially troubled debt. Among the most troubling: corporate borrowers and so-called non-bank lenders all over the world.

Globally, nature provides services worth around $125 trillion a year

As bank lending dried up, more and more companies began raising money by selling bonds, and many of those bonds are now held by these non-bank lenders — mainly money managers such as bond funds, pension funds or insurance companies.

1/8 of global wealth is estimated to be caught in illicit financial activity

Some United States companies that were publicly traded in 2008 have since gone private, often precisely in order to avoid intensified scrutiny from regulators. Many of those companies were purchased by private equity firms, in deals that leave the companies saddled with huge debts. Right now the typical American company owned by a private equity firm has debt six times higher than its annual earnings — or twice the level that a public ratings agency would consider high-risk or “junk.”

In the US, startups opt to stay private longer and longer. US startups pulled in $30.8 billion in the first quarter of 2019, up 22 % year-on-year. The number of mega-rounds — financings larger than $100 million — fell to 57 deals in Q1, and accounted for $16.4 billion.

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This is a mirror image of a decade ago when #emergingmarkets were booming. #antibubble

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And what about the emerging markets?

India-born Ruchir Sharma, Chief Global Strategist and Head of the Emerging Markets Equity team at Morgan Stanley Investment Management, argues that it is very unusual for all the emerging markets to boom at once, the way they did between 2000 and 2010.

China has reached a stage in development, with a per capita income of around $6,000, at which the growth of even the most successful economies in history (including Japan, Korea and Taiwan) began to slow markedly. And as China slows, nations like Brazil and Russia that thrived mainly by selling raw materials to China will slow as well.

A few nations will summon the strength to reform even in good times, and others will wallow in complacency for years — a tendency that helps explain why, of the world’s nearly 200 economies, only 35 have reached developed status and stayed there. The rest are still emerging, and many have been emerging forever.

By the peak of the boom, in 2007, roughly 60 % of the world’s economies had hit annual growth rates of at least 5 %, a record high number of economies and far above the 35 % average of the post–World War II era. Even more unusual, only five economies contracted that year. Then came the financial meltdown of 2008.. By 2014, the percentage of the world’s economies that were growing at 5 % or faster had fallen from 60 % to 30 %.

The total estimated infrastructure investment needs across the global economy amount to $90 trillion over the next 15 years (some $6 trillion per year). Based on current levels of investment from public and private sources , the next 15 years will see a $2-3 trillion annual shortfall in infrastructure investment.

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#investmentbanking #wealthmanagement

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Historically, the biggest stock market returns came in the fastest-growing economies. But that pattern changed in recent years, as investors chased technology at the expense of everything else. The highest returns came in slow-growth countries such as Taiwan. The lowest came in fast-growing economies like the Philippines. The reason: Taiwan is a tech-driven economy, the Philippines is not.

Until the tech reversal began in October 2018, stock markets from Southeast Asia to Eastern Europe and Latin America were trading at multidecade lows relative to the United States. For the price of Apple you could have bought all the companies in three of the largest markets of Southeast Asia: Indonesia, Malaysia and the Philippines. Or all the public companies in the three largest markets of Eastern Europe — Poland, Czechia and Hungary — nearly three times over.

It’s a version of the chicken and egg problem: we under impact-invest because we have fewer savings because of lackluster annual growth and most nations being forever emerging OR because we are lousy managers of more than enough of assets we have already generated over previous couple of centuries? A bit of both, of course. Now question is who would want to get into a cross-border partnership to tackle both bottlenecks in a systemic way?