M&G’s Leaviss: ‘Helicopter money will come very much to the fore’


Helicopter money could soon be on central banks’ agendas as their existing arsenal of monetary policy fails to boost the economy, says M&G fund manager Jim Leaviss.

“If these negative rates don’t succeed in stimulating global growth then I think helicopter money will come very much to the fore. We’ll start to see cheques being mailed out to each of us to go and spend,” Leaviss this week told the Morningstar Investment Conference.

Helicopter money involves central banks providing loans for governments to boost the economy through fiscal policies, such as infrastructure spending or one-off tax cuts.

Leaviss, M&G’s head of retail fixed interest, questioned the impact of existing ECB policy on the wider economy, despite its latest measure to buy corporate bonds providing a “huge boost to the corporate bond market”.

“It’s going to send prices higher and higher month after month. But the next question is whether this is really going to help the European economy, and I think the answer is only a little bit,” Leaviss says.

Investment grade companies, the main beneficiaries of the ECB’s corporate bond buying programme, do not need access to more cheap credit, says Leaviss.

Compiling a list of the most likely beneficiaries from the ECB action, Leaviss says only a couple needed the money.

“EDF will need the money for the Hinkley Point power station, Volkswagen will probably need the money to pay a fine or two,” Leaviss says.

Anheuser Busch, Daimler Finance and BMW are among the other companies likely to benefit from the corporate bond buying programme.

“Investment grade companies, have got lots of cash on their balance sheets already,” Leaviss says. 

“Do they really need help in reducing their borrowing costs? They’re already borrowing at the cheapest levels in history, they’ve got cash, they don’t know what to do with the money.”

Rather than big companies it is SMEs and households that need money, says Leaviss.

Old Mutual UK Alpha fund manager Richard Buxton, also speaking at the Morningstar conference, says there is talk that helicopter money could come to the US in 12 to 18 months.

This would only be in the case of a recession, says Toby Nangle, head of multi asset allocation at Columbia Threadneedle, which was not a base case for the asset manager.

Elsewhere, Japan might introduce the policy as soon as June; however, introducing the policy in the Eurozone would not be so straightforward, Nangle says.

“The Eurozone is pretty much the most complex area to think about this because there is no central fiscal authority.

“The ability of the ECB to lend directly to governments would seem to be prohibited in its constitution, which is against monetary financing, so you’d need to have a structural change or you’d get the lawyers at work to try to find a way it could basically circumvent its mandate.”

Nangle says the purpose of helicopter money is to boost aggregate demand, but he says he sees no real reason why governments would use helicopter money rather than straight fiscal expansion to achieve this.