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Holly Cook: Here at the Morningstar Investment Conference, we have just finished up with a panel discussion about asset allocation. I have three gentlemen joining me. We are going to cover the simple question of what keeps them awake at night within the realm of the investment outlook.
So starting with you, Stewart, with your fixed income background.
Stewart Cowley [Head of Fixed Income, Old Mutual Global Investors]: Well, I think my problem is that somebody is going to make a mistake. The Fed is going to say something silly, and a lot of the assumptions about quantitative easing are going to be reversed very quickly. I mean, I believe the Fed when they say that they are going to buy $85 billion worth of securities every month for the foreseeable future; don't fight the Fed. But any indication that this is going to come to an end and every day that goes by is just one day closer to it coming to an end; means that the market will very, very quickly price in rising yields.
It's going to be pretty disruptive when this happens. There is a lot of leverage in the system right now, both in fixed income and in equities as well. We work in highly reactionary markets. A big reversal in bond yields which catches everybody unawares; we have equity type losses in safe government bond funds, I mean, that's the real thing which worries me right now.
Cook: Okay. Well, thanks very much, Stewart. Moving on to the equity perspective, Chris Rice.
Chris Rice [Head of Pan-European Equities, Cazenove]: Hello. I guess there are two things that keep me awake at night. The first one would be, over the last five years since the crisis started, investors have spent a lot of time trying to build safety into their portfolios in anticipation of something disastrous happening. When I look at asset prices in my area, European equities, but also elsewhere, I see the price of safety being exceptionally high today. That's the sort of thing that I think we can lose a lot of money in the future. The second thing that keeps me awake at night is, as a life-long Evertonian, who is going to replace David Moyes. So once we have the answer to that, I'll be a happier man.
Cook: Thanks very much. Finally, Ewan, from the investment strategist perspective.
Ewan Cameron Watt [Chief Investment Strategist, BlackRock]: Well, I think what worries me most is the thought that investors own too much cash, and they expect that they’re going to earn a real return from that, and they are not. For every day they continue to hold that cash, they are expecting a major collapse in asset prices, or else they are simply depriving themselves of a strong financial future.
Cook: Well, gentlemen, thank you all very much. I trust you enjoyed yourselves on the panel, and we hope to see you again in future years.
Cowley: Thank you.
Rice: Thank you.
Cameron Watt: Thank you.
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