The only solution, heavy but quick, to the problems of the Eurozone, passes through the default and the exit from the euro of Greece. The alternatives, i.e. leveraging the current or unstrengthened bailout fund to an exponential extent, rather than the transition to a greater fiscal union in the Eurozone do not seem able, either due to the time required or due to the complexity of the process, to convince the markets on the recovery of Europe. This is the snapshot of the crisis that John Greenwood, chief economist of Invesco, reiterated on Thursday 20 October in the City of Milan in front of a select audience of excellent clients of the firm, one of the large independent realities of the asset management industry, before an agreement was reached in Brussels on the Greek debt and on the bailout fund.
"We do not believe that the G20 summit will bring significant changes to this panorama: a fundamental raw material will continue to be missing: market confidence" adds Sergio Trezzi, 40, who has been with Invesco for 11 years, for which he is responsible for Italy and Greece , but also Germany, Austria. Benelux and Nordic countries. The alternative is the "big bazooka" with access to trillions of euros. Greek economy in parallel with the strengthening of the other Eurozone countries”.
The other possible scenarios for avoiding the Japanese-style debt trap do not seem able to avert the risk of a slowdown in growth. “I foresee – is Grenwood's analysis – growth in the Eurozone slowing down to 1,6% in 2011, which masks a wide divergence in performance between the central areas undergoing a slowdown and the peripheral ones, stagnating or undergoing of contraction". And yet, despite the low growth rates for credit and the money supply, the regressive trend of wages and consumption and a certain unused production capacity in the region, "the prices of raw materials, which increased in the first part of the year, will maintain the primary inflation around an average of 2,4% higher than the ECB's target. It will be a few months before Mario Draghi can cut the ECB's main refinancing rate from the current 1,5%.
So far the macro analysis of one of the gurus who boasts one of the best "track records" of the world industry in these years of crisis, in Italy to explain, among other things, the philosophy of the latest generation of balanced funds created, after lengthy tests, from Invesco, one of the world's great savings workshops: no longer a simple percentage division of the investment between shares and bonds, which in recent years has proven to be incapable of managing risk in volatile markets, but a "risk parity”: each asset class (shares, bonds, commodities) is weighted so that each of them can contribute an identical percentage of risk to the portfolio, optimizing the composition of the assets in the various phases of the cycle. One way to avoid nasty surprises when a traditionally "quiet" asset, such as government bonds, risks turning out to be a thrilling bet.
“The operation was successful on the US markets” explains Trezzi. “For two years – he adds. We are testing the product on the European markets”. Already, by now the analysis and testing times of a financial product closely resemble those of the most significant industrial products, such as a car. Indeed, the introduction of virtual reality in the design of a vehicle has reduced (with considerable drawbacks, judging by the increase in components to be withdrawn from the market) the time to introduce a vehicle. But not those of an ETF or a fund management formula capable of weathering storms. This too operations with adequate financial firepower. A process still in its infancy, in Italy. “That's the way it is – confirms Trezzi – even if some clichés need to be debunked”.
What kind?
“First of all, it is not at all true that asset management is a declining or low-earning industry. Some international competitors, in Italy, obtain excellent results on a par with some Italian competitors. The reality is that there is room for independent structures dedicated to this business”.
Other clichés.
“Italy does not have, as is believed, a more immature public of savers than other countries. On the contrary, the negative experiences accumulated in the past have had beneficial effects: today more and more the customer puts the expected return in relation to the duration and at the maximum risk you intend to bear. In the end"
In the end?
“It is not at all true that the Italian consultancy system is more backward. In contrast, the much-celebrated British are trying to build common platforms for product analytics and management. In Italy this is already the reality of the 4-5 main networks”.
The problem of independence remains.
“The basic requirement for proper customer service. In Italy the evolution of the system is lagging behind compared to the rest of the world, but I think the time is ripe”.
Why so much optimism?
“The M&A season so far has been delayed by overburdened values from managed companies. But, thanks to Basel 3 and Ucits IV, the banks will have to review their strategy: one must not pay attention to the book price, but one must sell to realize. I am convinced that this is the obligatory path of the system”.
Are the banks really facing such a complicated season?
“Much will depend on the support they receive. But one thing is certain: all institutions are now grappling with investments designed in the boom years to serve a growing market. Today, on the contrary, it is necessary to adjust the offer to a lower demand. And it is important to concentrate on the area, ie the commercial bank, which offers the greatest margins and the least risks. Whoever does it first will be the winner."
