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INVESTMENT: An Investment Expert's Global Perspective
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An Investment Expert's Global Perspective

By Michael Dow

This month we were fortunate enough to sit down with a leading asset manager to gain her insight into what is going on around the globe and what investors can expect going forward. Tianjin-born Sabrina Liu belongs to the new generation of Chinese financial whizz kids who take their talents overseas to some of the world's leading investment institutions. Since graduating from the prestigious UCLA she has worked for several high profile financial institutions, including JP Morgan Chase. At the moment she is based in Los Angeles, where she works as a securities analyst for leading mutual fund firm Guggenheim Partners LLC. During her most recent visit to her home town we caught up with Ms. Liu to find out what is going on in the investment world and what she thinks will happen in an increasingly turbulent global economy.

BT 201506 29 InvestmentThank you for talking to us. Could you start by telling us a bit about your background and what you are doing at the moment?
It is my pleasure to talk to you and your organisation. I was born and raised in Tianjin but since I graduated with a degree in finance from UCLA I have been based in the United States. I did my internship with JP Morgan Chase in New York but when I got an opportunity to move back to the west coast I couldn't resist taking it. I am currently living and working in Los Angeles for an asset management company called Guggenheim Partners. Our firm provides a wide range of financial services, including mutual funds, ETFs and so on, but I am mainly involved in the equities and bonds side of things.

BT 201506 30 InvestmentLet's start by talking about China. The economy is slowing down and there are all kinds of uncertainties ahead, yet the stock markets are rallying like never before. What do you see happening in the near future?
There is no doubt that the double-digit growth era is over. Anyone who is investing in the kinds of asset classes that have boomed for the last couple of decades would be well advised to diversify their holdings. We should remember though that slower GDP growth doesn't necessarily make China a less attractive investment environment. Firstly, even if the economy grows by 6-7% in the next few years that is still a very fast pace compared to most other countries in the world. Secondly, if the government succeeds in making the growth more sustainable and higher quality then that will improve the overall health of the economy, society and ultimately the financial markets. The final point to consider with regards to the current bull market is that yes the markets have shot up more than 100% over the last year or so but many Chinese equities have been severely undervalued for some time. The relaxing of financial regulations and the Shanghai-Hong Kong Stock Connect has encouraged a capital inflow and made the mainland indexes more attractive to investors.

In the near future I see the upward trend continuing, especially as interest rates keep getting slashed. My main concern would be the credit situation, which everyone should keep a close eye on.

BT 201506 31 Investment HLChina may still be booming but other emerging markets, particularly the other BRIC countries, seem to have lost their shine. Do you still see some value in these nations?
Certainly! There is value everywhere but sometimes it is difficult to spot the opportunities. Take Brazil for example. The economy, the markets and the currency have all taken a dive in recent years. On the surface it doesn't look like a particularly attractive place to invest. However, this is still an emerging market that has a massive workforce, a growing middle class, a massive amount of natural resources and good diplomatic relations with all the major economies in the world. In addition to that, Brazilian equities are notoriously generous dividend payers, so to overlook them based on the macro picture would be unwise.

In terms of the emerging markets in general, what we have seen is a significant re-allocation of capital by financial institutions towards recovering developed nations like the U.S., the UK and Japan. Although the emerging markets in Asia and Latin America have a lot going for them there is no denying that investors feel safer with assets in the more mature markets. This is especially true of bonds and currencies.

BT 201506 32 InvestmentSpeaking of bonds, most people are expecting to see some big corrections in 2015-16 as the Federal Reserve and other central banks put interest rates back up to normal levels. What is your view?
Well, people have been speculating about interest rate rises in the U.S. for some time. It has seemed inevitable that as the economy picks up the Fed will raise rates. The recent data though, which includes a higher than expected trade deficit and a slowing of GDP growth, has spooked a lot of people. Perhaps the Federal Reserve will also be more reluctant to make any big moves, nobody can say for sure.

Of course, even if the bond market takes a hit, they are a crucial asset class that should feature in everyone's portfolio -whether it is a big financial company or an individual investor. In the long term they will likely serve investors well.

Do you think that the ongoing rallies in the United States and Britain are sustainable?
Sustainable is always a tricky term to apply to stock markets because we never know when a downturn might occur. These stock markets have done very well over the last few years and they look fairly healthy for the time being. If growth in the U.S. continues and interest rates remain low then, amidst all of the geopolitical tension around the world, American assets will continue to attract investors. The UK is also a very enticing destination at the moment because it has the fastest growing economy in the Western world and a new majority government that the markets seem to like the look of. There are plenty of underlying factors that could rock the boat, especially if the Euro zone deteriorates even further, but on the whole these two markets still look quite good compared to all the others.

BT 201506 33 InvestmentOn a final note, the reputation of mutual funds has taken a bit of a hammering in recent years. As an asset manager for one of the largest mutual funds in the world, how would you make the case for them?
It is true that index funds and ETFs have become a lot more popular in the last few years as investors are looking to reduce costs and take a more hands-off approach to investing. Some of the negative press that mutual funds have had is not completely justified. There is a lot to be said for actively managed funds that have a long history of high performance and stability. If you look hard enough you can find value for money in a company whose sole mission is to protect your financial future.


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