mckinsey_powerbroker

mckinsey_powerbroker - 1 SEPTEMBER 2009 mckinsey global...

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1 SEPTEMBER 2009 The new financial power brokers: Crisis update Although their paths are diverging, all will remain powerful forces in the global economy. Susan Lund and Charles Roxburgh M C K I N S E Y G L O B A L I N S T I T U T E
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2 Last year’s events have altered the fortunes of the four large groups of investors—oil exporters, Asian sovereign investors, hedge funds, and private-equity Frms—described as “the new power brokers” in a 2007 report from the McKinsey Global Institute. 1 That MGI study analyzed their rapid rise in wealth and clout at a time of soaring crude prices, expanding trade, and cheap credit. Although the boom years ended in late 2008 as the Fnancial crisis escalated and the global economy slumped, new MGI research shows that the power brokers fared relatively well. 2 But their future paths have diverged: petrodollar and Asian sovereign investors are more in±uential than ever, while the rapid growth of hedge funds and private-equity Frms has halted abruptly. To understand the future evolution of the power brokers, we modeled changes in their Fnancial assets over the next Fve years under different macroeconomic scenarios, each with a speciFc trajectory for global GDP, oil prices, trade, recovery in Fnancial markets, and other key variables. We Fnd that the assets of oil exporters and Asian governments will grow rapidly in nearly any scenario. The source of their wealth—trade surpluses—will continue in every case we considered, though the magnitude of those surpluses would vary. Indeed, we now project that in the base-case scenario the Fnancial assets of oil exporters and Asian governments will reach levels higher than those we projected in our original 2007 report. In contrast, our future projections for assets under management by hedge funds and private-equity buyout funds are lower. We still expect the best of each to survive and even thrive, but it will take time for the portfolios of these institutional investors to recover sufFciently for them to raise substantial new funds. Here we will outline our projections for the four groups of investors under three of the four scenarios we considered. The Frst scenario, the “quick Fx,” envisions a relatively fast economic recovery in which global GDP starts growing again in late 2009, oil prices climb steadily to nearly $100 a barrel by 2013, Asian trade surpluses grow (though more slowly than in the past), and credit markets return to health. In our base-case scenario, “battered
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mckinsey_powerbroker - 1 SEPTEMBER 2009 mckinsey global...

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