Debt pain still to come
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The report on global debt by the McKinsey Global Institute, the economic research arm of a global management consultancy, is likely to make painful reading for fund managers.
Equity managers are likely to find the prediction of slow economic growth for many years particularly disheartening. Those who specialise in Britain, which looks likely to be hit particularly hard, could be especially downbeat.
McKinsey’s study of 10 developed economies and four emerging economies argues that a period of deleveraging has barely begun. So far most of what has happened is simply a transfer of debt from the public to the private sector. (article continues below)
Britain suffered the largest increase in debt relative to GDP of any of the large economies from 2000 to 2008. Even after adjusting for London’s role as a global financial centre it has second highest debt to GDP ratio among its peers apart from Japan.
Of course many fund managers would claim they have the skill to pick stocks that outperform even in a difficult environment. But although some of them may achieve this exalted goal it is impossible, by definition, for all of them to do so.
