The sad thing about the comprehensive work of the National Intelligence Council looking at future global trends is that it only is published every four years, and the speed of change has been increasing dramatically.
To that end, #GT2030 has commissioned a blog and social media to more frequently update its work and incorporate thoughts from experts around the world. I also think the commission of a “track record of the global trend studies” is a helpful indicator, reviewing prior predictions and adjusting methodologies and frameworks as needed.
A first important finding thus: “… a comprehensive reading of the four reports leaves a strong impression that [we] tend toward underestimation of the rates of change.”
One of the suggested solutions: more wargaming and simulation exercises among various actors. Of course, this is something the investment management industry needs much more of as well. As the rate of change is multiplying along with global complexities, CEOs should engage in more strategic exercises, simulations and, probably a first, wargaming.
So far very few firms are doing this, almost none is doing it on a global basis.
The interplay of megatrends, game-changers and potential worlds: GT2030 provides a “framework for thinking about possible futures and their implications” as it differentiates between megatrends, game-changers and possible worlds and outcomes.
A global middle class: The first megatrend is the growth of a true global middle class, described as a tectonic shift by the authors as for the first time a majority of the population worldwide will not be considered impoverished.
This trend is especially close to my heart. The mutual fund and asset management industry’s backbone is the growth of the middle class and greater participation in capital markets, with a sustainable shift from savings to investments and long-term financial goals. The US industry only started to reach its current size once the 401k market and, with it, household mutual fund penetrations started to grow.
Our research found that the current global middle class of about 500 million people will quadruple in the next 10-15 years, to 2 billion, mostly in fast-growth emerging markets.
Diffusion of power, driven by emerging economies: Global power will be more influenced by China, Brazil, India, Colombia, Indonesia, Nigeria, South Africa and Turkey, than by Europe, Japan or Russia. Big changes ahead and actually already under way, and we are going to rely more on the East and South than the West. However, communication technology will change the nature of power as well.
My travels to each of these high impact markets of the future equally convinced me of the necessary focus for leading asset managers to think through how to address each of them – if they want to survive and flourish, that is. Much of the emphasis for it should be on the appropriate message to go along with the complexity of investment strategies.
For instance, South Africa-based Investec was the leading investment boutique in terms of global cash flows last year, with now $100 billion in AUM – and a first-class four minute video about the firm. Similarly, my visits with Brazil powerhouses last week, such as BTG Pactual, indicates greater participation of these regional specialists in global asset holders’ beauty contests around in demand themes and regional exposures. And the top cash flow product in the US this year, DoubleLine’s flagship MBS fund, gains visibility from Jeff Gundlach’s popular podcasts.
Shifts in demographic patterns: aging, migration and urbanization will alter demographic patterns most, with impact on food and water, as well as energy overall.
Now let’s get to the game changers: the fragile global economy (collapse or multiple resilient growth centers), the governance gap (an ever more diverse set of state and non-state actors), intra- and interstate conflicts with various risk baskets, wider scope of regional instability, the impact of new technologies (information technology entering an era of big data, new manufacturing and automation technologies, technologies for the security of vital resources, and new health technologies), and the future role of the US in the world.
The most unpredictable black swans listed include a global pandemic, more rapid climate change, Euro or China collapse, a reformed Iran, nuclear war/cyberattack, solar geomagnetic storms or a US disengagement.
Thus, the asset management industry is entering E=MC, an era of multi convergence, with the equivalent of what the study calls multipolarity: multiple silos and centers of growth around the world, acting in isolation from but under the impact of global trends.
A lot of fun for those firms that are flexible enough to deal with the added layers of complexities, uncertainties and volatility. But for the many firms tied down by compliance and bureaucratic obstacles, good night and good luck.
I invite you to follow me on twitter @danenskat
(c) Enskat Associates 2012
More details on the global asset management industry can be found in EAQ, a quarterly asset management review featuring thought leaders globally.
Warren Enskat Group 