AI Magazine Issue 3 2017

Acquisition International - March 2017 37 Calibre, Dedication and Professionalism With today’s significant global economic, political and social challenges, the importance of credible knowledge and experience should not be underestimated. After all, the financial landscape has changed markedly over recent years. Central banks have been engaging in ever more unconventional and untested policy tools. Policy short-termism has become a global disease. Bold and dramatic policy measures (be they excessive quantitative easing or currency intervention) have created a false, fractious and unbalanced marketplace. Whilst the benefits of many of these measures are front-loaded, the costs will, no doubt, be back-loaded. The central banker’s role seems to have changed, radically. Traditionally tasked with setting the rules, they now seem to be playing the game at the same time. In steering through this new financial and economic world order, one requires not just an understanding of the world macro-economic backdrop, but a recognition and capturing of the key driving forces (be they financial, economic, political or social) and turning points. At ECU, we are driven by high calibre research inputs. In determining our global macro strategy, we draw upon the breadth and experience of our Global Macro Research & Advisory Team, members of which contribute their considerable experience, expertise and independent views from each of their own specialist focal points (be they monetary policy, economics, technical analysis, international politics, market intelligence or trading and execution) to assist us in developing a balanced and informed high level investment roadmap. Individual members of the committee are highly regarded in the investment industry and are advisers to a number of the world’s largest fund managers, sovereign wealth funds, central banks and governments. The Global Macro Research & Advisory Team’s high level process helps ECU to formulate its “big picture” global investment roadmap from which all the company’s products and services derive their individual bearings. At ECU, we have drawn together both the people and the products to work with our clients, in partnership, to help steer them through a very different economic and political world order. To preserve one’s wealth over time, consideration needs to be given to the best long-term currency strategy. The global economy and financial markets have undergone dramatic changes over recent years. Actions and reactions have culminated in the single largest financial and economic crisis since the Great Depression. At the same time, longer term structural changes (e.g. globalisation, technological advancements, demographics and the geopolitical balance of power) are taking place which will exert persistent pressures on economies and financial markets, especially currencies. The resultant opportunity for profit and loss over coming years is likely to be considerable. It is our profound belief that global investors face growing investment challenges brought on by a marked increase in market volatility going forward. Accordingly, a competent and effective currency risk management strategy is more important now than ever before. After a quarter of a century of refinement and the evolution of technological systems, we have been able to develop some of the most versatile global macro and multi-currency products and services ever witnessed in the financial arena, giving international trading companies, investors and borrowers alike the opportunity of using the world’s largest financial market to their distinct advantage. In 2015/6, ECU provided the economic insights for Change, or Go – an authoritative 1,032 page all-encompassing research publication (serialised by the Daily Telegraph), that demonstrated why the EU needed to change and concluded how and why Britain would otherwise be better off leaving an unreformed EU. Unlike the copious amounts of sensational, but highly inaccurate, claims subjected upon us all by both sides of this debate during the Referendum campaign, these economic inputs were based on hard facts and inescapable financial, economic, social and political realities and trends. Without a doubt, the long term ramifications of both the Brexit vote and Trump victory are deeply profound and cannot be underestimated. Indeed, they will, no doubt, be recorded in history as truly defining moments. What now lies ahead is potentially one of the biggest and clearest long term currency prospects of a generation. Factor one: Over the next 5-7 years, there is an overwhelming balance of probability that monetary union in Europe, as we know it today, will fail. We consider this an inescapable conclusion. We have specialised in the euro and EMU since its conception, through to its introduction and throughout its evolution ever since. Its construct was and remains to this day deeply flawed, driven by political expediency, and not economic, financial or social reality. It is wholly unstable, divergent and unquestionably to our thinking and analysis, from every objective angle, utterly unsustainable. Its trajectory towards disintegration remains clear for all to see. Factor Two: Over the next generation, for a whole host of contributory factors (underpinned by powerful global economic, demographic, (geo) political and social trends, together with important advances in technology), we believe that the UK’s wider economy will ultimately thrive outside of the EU. As such, whilst there will be much political posturing and media fanfare, we consider many of the market’s present longer term misgivings on life for the UK economy after Brexit to be dubious, unsupported by credible evidence or historical example and/or simply flawed. Regardless, such misgivings are almost certainly overdone. The UK economy is highly likely to outperform the Eurozone as a whole for as long as the EU and Economic and Monetary Union within Europe, as we know it, exist. The prospect of one of G7’s top performing economy retaining the weakest currency status indefinitely is neither realistic nor likely. In short: Not only will sterling, in our opinion, mean- revert over the coming years from its present (and excessive) undervaluation, but, within say 10 to 15 years, we see it becoming one of the strongest currencies of all (most likely attracting a safe-haven status at certain junctures of European turmoil). Against the euro, we deem this recovery and subsequent strengthening is likely to be significant and, at times, unremitting. Bottom Line: We believe that we now have one of the clearest and most significant macroeconomic movements in the making. The currency implications will be significant and, at times, unremitting. Consequently, UK companies and investment managers alike should seek to implement strategies that will serve to protect their businesses and/or clients against the potential losses that such an outcome may generate for them, or to strategically position themselves in any manner of ways in which they can profit as a consequence of such eminently foreseeable events unfolding.