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Transcript of MGI Emerging Equity Gap Executive Summary (1)
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8/3/2019 MGI Emerging Equity Gap Executive Summary (1)
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McKinsey Global Institute
December 2011
The emerging equity gap:Growth and stability in thenew investor landscape
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Copyright McKinsey & Company 2011
T MKi G Ititt
The McKinsey Global Institute (MGI), the business and economics research
arm o McKinsey & Company, was established in 1990 to develop a deeper
understanding o the evolving global economy. Our goal is to provide leaders
in the commercial, public, and socia l sectors with the acts and insights on
which to base management and policy decisions.
MGI research combines the disciplines o economics and management,
employing the analytica l tools o economics with the insights o business
leaders. Our micro-to-macro methodology examines microeconomic
industry trends to better understand the broad macroeconomic orces
aecting business strategy and public policy. MGIs in-depth reports have
covered more than 20 countries and 30 industries. Current research ocuses
on six themes: productivity and growth; the evolution o global nancial
markets; the economic impact o technology and innovation; urbanization;
the uture o work; and natural resources. Recent reports have assessed
job creation, research productivity, cities o the uture, and the impact o the
Internet.
MGI is led by three McKinsey & Company directors: Richard Dobbs, James
Manyika, and Charles Roxburgh. Susan Lund serves as director o research.
Project teams are led by a group o senior ellows and include consultants
rom McKinseys oces around the world. These teams draw on McKinseys
global network o partners and industry and management experts. In
addition, leading economists, including Nobel laureates, act as research
advisers.
The partners o McKinsey & Company und MGIs research; it is not
commissioned by any business, government, or other institution.
For urther inormation about MGI and to download reports, please visit
www.mckinsey.com/mgi.
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McKinsey Global Institute
Charles RoxburghSusan LundRichard DobbsJames ManyikaHaihao Wu
December 2011
The emerging equity gap:Growth and stability in thenew investor landscape
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Total value o global
fnancial assets in 2010,
$198 trillion
21% in emergingeconomies
fnancial assets held byhouseholds (excluding retirementaccounts and insurance products)
$85 trillion
o emerging markethousehold portoliosare invested in equities,compared with
in UShouseholds
15%
42%
Global financial assetstoday . . .
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in emergingeconomies
Projected value o global
fnancial assets in 2020,1 with
$371 trillion
30%Estimated share o globalfnancial assets in listedequities in 2020, down rom22%
in 201028%
Potential global equity gapin 2020
$12.3 trillion
. . . and tomorrow
1 Base case scenario, derived from consensus GDP growth forecasts (using 2010 exchange rates).
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The emerging equity gap: Growth and stability in t he new investor landscape
McKinsey Global Institute
1
Several orces are converging to reshape global capital markets in the coming
decade. The rapid accumulation o wealth and nancial assets in emerging-
market economies is the most impor tant o these. Simultaneously, in developed
economies, aging populations, growing interest in alternative investments, the
move to dened-contribution pension schemes, and new nancia l regulations are
changing how money is invested. These orces point to a pronounced rebalancing
o global nancial assets in the coming decade, with a smaller share in publicly
listed equities.1
This emerging picture is based on new research by the McKinsey Global Institute
on the size, growth, and asset allocations o investor portolios around the world.
This work complements our previous reports on de leveraging in the worlds major
economies and the e ects o an investment boom in emerging markets on real
interest rates in coming decades.2 In this report, we develop new insights into
how the worlds nancial assets are growing and being invested, and how these
assets could evolve over the next decade. Among our key ndings:
Today, investors in developed economies hold nearly 80 percent o the worlds
nancial assetsor $157 trillionbut these pools o wealth are growing slowly
relative to those in emerging markets.
The nancial assets o investors in emerging economies will rise to as much
as 36 percent o the global total by 2020, rom about 21 percent today. But
unlike in developed countries, the nancial assets o private investors in these
nations currently are concentrated in bank deposits, with little in equities.
Several actors are reducing investor appetite or equities in developed
countries: aging populations; shits to dened-contribution retirement plans;
growth o alternative investments such as private equity; regulatory changes
or nancial institutions; and a possible retreat rom stocks in reaction to low
returns and high volatility.
Based on these trends, we project the share o global nancial assets in
publicly traded equities could all rom 28 percent today to 22 percent by
2020. That will create a growing equity gap over the next decade between
the amount o equities that investors will desire and what companies will need
to und growth. This gap will amount to approximately $12.3 trillion in the 18
countries we model, and will appear almost entirely in emerging markets,
although Europe will also ace a gap.
1 In this report, we use the terms equities and stocks to reer to shares in publicly listedcompanies, not the unlisted equity in privately- or government-owned companies.
2 See McKinsey Global Institute, Debt and deleveraging: The global credit bubble and its
economic consequences, January 2010, and Farewell to cheap capital? The implications o
long-term shits in global investment and saving, December 2010. These reports are available
online at www.mckinsey.com/mgi.
Executive summary
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2
As a result, companies could see the cost o equity rise over the next decade
and may respond by using more debt to nance growth. Only a tripling o
equity allocations by emerging market investors could head o this drop
in demand or equitieswhich will be dicult to accomplish in this time-
rame, given the remaining institutional barriers. The probable outcome is aworld in which the balance between debt and equity has shited.
The implications o this shit are potentially wide ranging or investors, businesses,
and the economy. Companies that need to raise equit y, particularly banks that
must meet new capital requirements, may nd equity is more costly and less
available. Reaching nancial goals may be more dicult or investors who choose
lower allocations o equities in their portolios. And, with more leverage in the
economy, volatility may increase as recessions bring larger waves o nancial
distress and bankruptcy. At a time when the global economy needs to deleverage
in a controlled and sae way, declining investor appetite or equities is an
unwelcome development.
Today, the advantages o investing in listed equities are be ing questioned in light
o corporate scandals and a perception that the markets may no longer serve the
interests o ordinary investors.3 But equity markets, when unctioning properly,
provide signicant benets across an economy. They are an important source o
long-term nancing or high-growth companies; they allocate capital e ciently;
and they disperse risk and reduce vulnerability to bankruptcy. These advantages
outweigh shortcomings, we believe, and make public equity ownership an
important element o a balanced global nancial system.
Global wealTh Is shIfTInG To eMerGInG econoMIesUntil this decade, the preerences o investors in developed nations have shaped
the evolution o global capital markets. Today these investors control 79 percent
o the worlds nearly $200 trillion in nancial assets (Exhibit E1).4
Broadly speaking, investors in developed economies hold highly diversied
portolios, with signicant portions in equities. The United States stands out or
consistently high equity allocations: currently US households have 42 percent
o their non-retirement nancial assets in publicly listed shares. Households in
Hong Kong have similar shares o their wealth in equities. On average, Western
European households placed 29 percent o their nancial assets in equities in
2010.
Among developed nations, Japan stands out or its ver y low investment in
equities. Despite a long tradition o equity investing by individual investors or
most o the 20th century, Japanese households now hold less than 10 percent
o their assets in equities, down rom 30 percent beore the 198990 crash.
Because o low or negative returns over the past two decades, Japanese
allocations have never exceeded 18 percent in this period.
3 See Dominic Barton, Capitalism or the long term, Harvard Business Review, March 2011.
4 We dene nancial assets as equities, bonds, and other xed-income securities, cash and
bank deposits, and alternative assets. We exclude the value o real estate, derivatives, physical
assets such as gold, and equity in unlisted companies.
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3The emerging equity gap: Growth and stability in t he new investor landscape
McKinsey Global Institute
Emerging market nancial assets grew 16.6 percent annually over the past
decade, nearly our times the rate in mature economies. These assets stood at
about $41 trillion in 2010 and constituted 21 percent o the global total, up rom
7 percent in 2000. Depending on economic scenarios, we project that emerging
market nancial assets will grow to between 30 and 36 percent o the global totalin 2020, or $114 to $141 trillion (Exhibit E2).5 Chinas nancial assets could be as
much as $65 trillion by then, and Indias could reach $8.6 trillion.6
With this growth, emerging markets will become an increasingly important
orce in determining the shape o the global nancial system. Emerging market
investors keep most o their assets in bank deposits (Exhibi t E3),7 which refects
lower income levels, underdeveloped nancia l markets, and other barriers to
diversication. A key question or the uture o global nancial markets is the
speed and extent to which investors in these countries will develop a larger
appetite or equities and other nancial instruments and diversiy their port olios.
5 Our base case consensus growth scenario and the two-speed recovery scenario use 2010
exchange rates, and so do not include impact o currency movements on asset values. We
model the eects o likely currency in an alternate scenario. See Appendix or addi tional detail
on the scenarios.
6 This high estimate includes the impact o appreciation o the renminbi and other emergingmarket currencies over the next decade
7 Moreover, in many emerging markets, a large share o wealth is held in physical assets, such
as real estate and gold. See Alok Kshirsagar and Naveen Tahilyani, Deepening fnancial
savings: Opportunities or consumers, fnancial institutions, and the economy, McKinsey &
Company, November 2011.
exiit e1
1 Includes Australia, Canada, and New Zealand.2 Includes both developed countries and emerging markets.3 Includes defined contribution plans and individual retirement accounts (IRAs).NOTE: Numbers may not sum due to rounding.
SOURCE: National sources; McKinsey Global Institute
Financial assets owned by residents, 2010
$ trillion
Large (>$10 trillion)
Medium ($310 trillion)
Small (
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4
Over the past century, there has been a clear pattern: with ew exceptions, as
countries have grown richer, investors have become more willing to put some
money at risk in equities to achieve higher rates o return. We have seen this
pattern not only in the United States and Europe, but more recently in Singapore,
South Korea, and Hong Kong. However, other actors must also be in place or
equity markets to thrive: rules and regulations that protect minority investors,
transparency by listed companies, sucient liquidity in the stock market, the
presence o institutional investors, and easy access to markets by retail investors.
exiit e2
The share of global financial assets held in emerging markets will rise
over the next decade in all economic scenarios
SOURCE: McKinsey Global Institute
14
1010
9
9
99
9
Western Europe
Japan
Other developed
China
24
Other emerging
22
2020F:Consensus with
currency appreciation3
391.5
17
19
2020F:Two-speedrecovery2
338.1
25
23
16
United States
18
2020F:Consensus
growth scenario1
371.1
27
24
14
16
2010
198.1
29
27
10
11
Total financial assets, 201020F
%; $ trillion
Emerging markets
financial assets
$ trillion
1 Measured in 2010 exchange rates.2 Rapid growth in emerging markets but low growth through 2015 in mature economies.3 Emerging markets currencies appreciate vis--vis the US dollar.
41 114 114 141
exiit e3
Today, most investors in emerging markets have very low allocationsto equities
Compound
annual growth
rate, 200010
%
Asset allocation by investor, 2010
%; $ trillion
18
39
15
54
65 5481 77
108
EmergingAsianhouse-holds
10
13
Emergingmarketcentralbanks
14
5
Other
Equities
Cash anddeposits
Fixed income
Chinesehouse-holds
90
24
1418
14
5 3
3.5
32
13
06.5
52
29
6
1.8
34
23
5
5.9
47
30
LatinAmericanhouse-holds
MENAhouse-holds
DevelopedAsianhouse-holds1
Sovereignwealthfunds
WesternEuropehouse-holds andpensions
US house-holds andpensions
2.73.64.328.342.0100% =
Traditional investors Emerging investors
4 8 239 16 16 14 223
1 Includes Singapore, Hong Kong, Korea, and Taiwan. Excludes Japan, where households allocate 10% of their portfolio toequities.
SOURCE: National sources; McKinsey Global Institute
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5The emerging equity gap: Growth and stability in t he new investor landscape
McKinsey Global Institute
Today, most emerging markets lack these conditions. Exchanges are o ten
dominated by state-controlled companies with only a small portion o their
shares trading publicly, exposing investors to high levels o volatility. Even where
appropriate regulatory rameworks have been erected, enorcement oten has
been weak. Limited visibility into corporate perormance and little accountabilityto public shareholders put outside investors at a urther disadvantage. Not
surprisingly, in a recent survey, more than 60 percent o investors in emerging
Asian economies said they preer to keep savings in deposits rather than in
mutual unds or equitiesa gure that has changed little over the past decade.8
why InvesTor deMand for equITIes MIGhT declIne In
developed econoMIes
Aging is the largest actor aecting investor behavior in mature economies. As
investors enter retirement, they typica lly stop accumulating assets and begin to
rely on investment income; they shit assets rom equities to bank deposits and
xed-income instruments. This pattern has led to predictions o an equit y sell-o
as the enormous baby boom generation in the United States and Europe enters
retirement9 (the oldest members o this cohort reached 65 in 2011). We nd this
ear is somewhat exaggerated, but the eects o aging are real: i investors retiring
in the next ten years maintain the equity allocations o todays retirees, equities
will all rom 42 percent o US household portolios to 40 percent in 2020and to
38 percent by 2030. In Europe, where aging is even more pronounced, we see an
even larger shit in household portolios.
Also infuencing equity allocations in mature economies are the shit to dened-
contribution retirement plans in Europe and rising alocations to alternative
investments. In Europe, we see that dened-contribution plan account ownersallocate signicantly less to equities than managers o dened-benet plans.
And as private pension unds close to new contributors, managers are shi ting
to xed-income instruments to meet remaining liabilities. Meanwhile, institutional
investors and wealthy households seeking higher returns are shiting out o public
equities and into alternative investments such as private equity unds, hedge
unds, real estate, and even inrastructure projects. Although we estimate that
some 30 percent o assets in private equity and hedge unds are public equities,
the shit is still causing a net reduction in allocations to equities.
Another actor weighing on demand or equities is weak market perormance.
The past decade has brought increased volatility and some o the worst ten-yearreturns on listed equities in more than a century. In opinion polls, Americans say
they have less condence in the stock market than in any other nancial institution
and believe that the market is no longer air and open.10 However, to put these
sentiments in perspective, it is also wor th noting that individual investors can
have short memories and may be willing to return to equities in the event o an
extended rally.
8 See Kenny Lam and Jatin Pant, The changing ace o Asian personal nancial services,
McKinsey Quarterly, September 2011.
9 See James Poterba, Demographic structure and asset returns, Review o Economics and
Statistics, Volume 83, Number 4, 2001, 565584. Also see Zheng Liu and Mark M. Spiegel,Boomer retirement: Headwinds or US equity markets? Federal Reserve Bank o San
Francisco, FRBSF Economic Letter, Number 26, Federal Reserve Bank o San Francisco,
August 22, 2011.
10 See Paola Sapienza and Luigi Zingales, Financial Trust Index, Results, Wave 12, October 19,
2011, and NBC News/Wall Street Journal, Study Number 10316, May 2010.
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The nal actor is the eect o nancial industry reorms on the uses o equities
by banking and insurance companies. US and European banks today hold
$15.9 trillion o bonds and equities on their ba lance sheets. But new capi tal
requirements under Basel III will prompt banks to shed risky assets, including
equities and corporate bonds. Similarly, European insurers have already reducedequity allocations in anticipation o new rules, known as Solvency II, and could
lower them urther over the next ve years. At a time when European banks need
to raise more capital, Solvency II constrains the insurance sector as a potential
purchaser o that equity.
The eMerGInG equITy Gap
As a result o shiting global wea lth and investor behavior, we estimate that by
2020 investors around the world may allocate just 22 percent o their nancial
assets to equities, down rom 28 percent today (Exhibit E4). The rise o wealth in
emerging nations is the largest actor in this shit, ollowed by aging populations
and growth o a lternative investments.
This trend away rom equities will aect how companies are unded. Even though
total investor demand or equities would still grow by more than $25 trillion over
the next decade in our base case scenario,11 this demand would not be sucient
to cover the amount o additional equity that corporations will need. Companies
issue shares to support growth and to allow ounders, venture investors, and
other insiders to monetize their shares. Using a sample o ten mature economies
and eight emerging markets,12 we calculate that companies will need to raise
$37.4 trillion o additional capital to suppor t growth. This would exceed investor
11 This scenario uses consensus orecasts or GDP growth and saving rates, and country-specic historic rates o asset appreciation. It allows or changing asset allocations due to
aging, regulatory changes, and shiting investor tastes toward alternative investments. See
Appendix or details.
12 Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico,
Russia, South Arica, South Korea, Spain, Turkey, United Kingdom, and United States.
exiit e4
In our baseline scenario, equities decline from 28 percent of financial
assets to 22 percent by 2020
SOURCE: McKinsey Global Institute
28.1
71.9
100% = 371.11
Equities
Otherinvestments2
2020F
21.8
78.2
2010
198.1
Global asset allocation, 201020F
%; $ trillion; 2010 exchange rates
1 Based on consensus global growth scenario.2 Includes cash, deposits, and fixed-income securities.
0.3
0.4
1.3
1.7
2.6
Equity allocation,
201028.1
21.8
-6.3 p.p.
Equity allocation,
2020F
Regulation
Pensions
Alternatives
Aging
Emerging markets
Change in global equity allocation, 201020F
Percentage points
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7The emerging equity gap: Growth and stability in t he new investor landscape
McKinsey Global Institute
demand in those countries by $12.3 trillion (Exhibit E5). Eventually, markets will
move to correct this imbalance: equity prices may all and returns may rise to
stimulate investor demand, or companies may use more debt and less equity to
und growth. Nevertheless, this change in demand would represent a signicant
reduction in the role o equities in the global nancial system.
Most o the emerging equity gap would occur in developing nations. Companies
in those countries not only have high needs or external unding to keep up
with their rapid growth, but they also have relatively low returns on invested
capital (ROIC), which limits their abili ty to use retained earnings to und growth.
In addition, many large companies, both privately owned and state owned, will
seek to list on stock exchanges and issue shares. In Europe, a smaller equity
gap would appear, as a result o declining investor appetite or equity, aging, and
rising needs or new equity by banks.
In the United States and several other developed countries, investor demand or
equities will most likely continue to exceed what companies will need because
many companies in these economies generate sucient prots to nance
investment needs. Indeed, US companies at the end o 2010 had more than
$1.4 trillion in cash, and over the past decade nonnancial corporations have
been buying back shares, rather than issuing new ones.13
Changes on several ronts could narrow the gap between corporate needs and
investor desire or equity. Households in the large equity investing countries
could be encouraged to save more and overcome home bias to purchase
more oreign equities. In addition, corporations, particularly in emerging markets,
could become more ecient users o capita l, enabling them to und more o
their growth through retained earnings. Finally, emerging market investors couldrapidly develop a larger appetite or equities. We calculate that i emerging market
13 See McKinsey Global Institute, Mapping global capital markets 2011, August 2011
(www.mckinsey.com/mgi).
exiit e5
1 France, Germany, Italy, Spain, and the United Kingdom.2 Australia, Canada, Japan, and South Korea.3 Brazil, India, Indonesia, Mexico, Russia, South Africa, and Turkey.
The emerging equity gap: Demand for equities may not
satisfy corporate needs
SOURCE: McKinsey Global Institute
Incremental demand for equities by domestic investors vs.
increase in corporate equity needs, 201020F
$ trillion; 2010 exchange rates
37.4
25.1
-12.3
Increase incorporateequity needs
Incrementaldemand forequities
4.7
3.5
2.8
4.3
9.8
10.5
7.9
3.9
5.9
9.2
Other emerging3
China
Other developed2
Western Europe1
United States
Increase in corporateequity needs
Incremental demandfor equities
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investors were to raise their equity allocations to current US levels over the next
decade, global investor demand or equities would match corporate needs.
However, such a sudden shi t in investor preerences would be unprecedented
and would require rapid evolution o institutions, market access mechanisms,
and practices that make markets attractive to indiv iduals seeking long-termappreciation.
econoMIc consequences and IMplIcaTIons for
coMpanIes and InvesTors
A shit away rom equity in the global nancial system is an important trend and,
in our view, an unwelcome one. Equity markets have enabled growth by eciently
channeling money to the best-perorming companies, including rapidly growing
enterprises that drive economic growth. Although the debate over the relative
merits o equity nance versus debt nancing is not settled, the most persuasive
empirical evidence suggests that i legal protections or shareholders are strong,
nancial systems that include robust capital markets in addition to bank nancing
promote aster and more stable economic growth than predominantly bank-based
ones.14
Moreover, at a time when the global economy still struggles to recover rom
the collapse o the credit bubble, greater use o debtwhether rom banks or
through capital marketswould be an unwelcome development. Public equities
disperse corporate ownership and give companies resilience in downturns; equity
is a highly eective shock absorber. By contrast, higher leverage increases the
risk o bankruptcy and economic volatility and makes the world economy more
vulnerable to shocks.
As their allocations to equity decline, ordinary investors may nd it more
challenging to meet saving goals. Institutional investors and wealthy amilies have
many options to generate high rates o returnprivate equity, hedge unds, real
estatebut retail investors do not. We nd that the poor equity returns o the past
decade are anomalous. For almost all ten-year periods in the modern eraexcept
in Japanequities have generated signicantly higher real returns than bonds.
Many companies are likely to nd that they are unable to raise enough equity in
their home countries or can do so only at high cost. Banks, par ticularly in Europe
where investor demand or equities is weak, may nd it challenging to nd buyers
or all the additional equity capi tal they need to raise. All companies will wantto think about sourcing capital globa lly by listing in markets where investors
demand or equities is strong, or through private placements o equity shares.
At the same time, shiting patterns o global wealth will create opportunities
and challenges or the asset management industry and or investors. Asset
managers will need an increasingly globa l reach to cultivate the emerging investor
classes o Asia and other regions, which will require tailored products to t their
preerences and budgets. In mature markets, aging and low returns present
growth challenges. However, there are unmet needs, too: the industry can prot
by educating investors about the nancial impl ications o longer lie spans,
including the need to get higher returns over a longer period. In this vein, some
asset managers may need to redesign target-date mutual unds i they reduce
14 See Thorsten Beck and Ross Levine, Industry growth and capital allocation: Does having a
market- or bank-based system matter?Journal o Financial Economics, 2002.
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9The emerging equity gap: Growth and stability in t he new investor landscape
McKinsey Global Institute
or eliminate equities too early to meet the ongoing accumulation needs o clients
today.
Investors around the world will need to think more globally. Today investment
portolios remain disproportionately skewed toward investors home markets.Investors in developed countries can tap aster pockets o economic growth by
buying oreign shares or shares o multinational companies that are active in ast-
growing markets. The challenge will be to nd sources o return commensurate
with the riskand to nd good values. Today, with the limited amount o shares
in emerging market companies available to public investors, valuations can be
distorted.
polIcy opTIons To consIder
We propose that business leaders and policy makers around the world consider a
range o options to ensure that the potential equity gap does not emerge and that
the world economy is set on a more stable, more sustainable course.
Emerging markets. Emerging economies can create the conditions in which
healthy equity investing cultures can take root. They can strengthen listing
requirements, ensure that securities regulations require ull transparency by
issuers, and provide meaningul protections to minority shareholders. Emerging
market ocials should also use regulatory changes and incentives to encourage
aster expansion o institutional investors, such as pensions and insurance
companies. They also can encourage development o more channels or equity
investing by households.
Developed countries.As we have argued in previous reports, increasing thesaving rate in the United States and other developed nations is an important step
or ensuring long-term growth and rebalancing the global economy. Increasing
saving overall would also increase fows into equities in these nations. More tax
incentives or saving, automatic enrollment in retirement plans (with the right to
opt out), and changes in the deault allocation are all proven saving boosters.
Additionally, we would look into removing tax biases that avor corporate use o
debt over equity and reducing management incentives that reward buybacks and
higher leverage. Finally, policy makers should also consider measures to revive
the IPO market, such as expanding the streamlined registration process or small
rms or creating a more robust legal ramework or crowdunding. Enabling
small-company listings is important or maintaining a vibrant equity culture thatattracts investors.
Global policy makers.The ree fow o capital between nations will be even
more important in a time o limited demand. To enable global capi tal fows,
emerging nations need to allow greater access to their equity markets while
protecting themselves rom the ebb and fow o hot money. Ultimately, the best
protectionand the best way to attract investmentis to develop broad and deep
nancial markets and credible oversight. To overcome home bias by investors,
nations can remove limits on overseas investing. Access to currency hedging
instruments and nancial education about global diversication would also help
investors raise their allocations o oreign equities. Finally, international regulatory
bodies should careully consider the cumulative impact o new regulations
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aecting banks and other nancial institutions, as these may have unintended
consequences.15
* * *
Governments and business leaders share a common interest in expanding the
supply o equity to the world economy. More equity will promote more stable and
possibly more rapid growth. Many steps that could reverse the current trends
against equities are well understood. Action now will ensure that the potential
equity gap does not emerge, and put the world economy on a more stable, more
sustainable course.
15 See, or example, Ahmed Al-Darwish et al., Possible unintended consequences o Basel III
and Solvency II, IMF Working Paper Number 11/187, August 2011.
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Debt and deleveraging: The global credit bubble and its economic
consequences (January 2010)
The bursting o the great global credit bubble has let a large burden o debt
weighing on many households, businesses, and governments, as well as on
the broader prospects or economic recovery in countries around the world.
Leverage levels are still very high in ten sectors o ve major economies. I
history is a guide, one would expect many years o debt reduction in these
sectors, which would exert a signicant drag on GDP growth. Read updated
analysis and 2010 report.
Farewell to cheap capital? The implications o long-term shi ts in global
investment and saving (December 2010)
By 2020, hal o the worlds saving and investment will take place in emerging
markets, and there will be a substantial gap between global investment
demand and the worlds likely saving. This will put upward pressure on real
interest rates and require adjustment by nancial institutions, nonnancial
companies, investors, and policy makers.
The new power brokers: How oil, Asia, hedge unds, and private equity
are shaping global capital markets (October 2007)
Four actorspetrodollar investors, Asian central banks, hedge unds, and
private equityare playing an increasingly important role in world nancial
markets. MGI oers new evidence on the size o these new power brokers,
their impact, and their growth prospects.
McKinseyGlobal Institute
TheNewPowerBrokers:HowOil,Asia,HedgeFunds,andPrivate EquityAreShapingGlobalCapital Markets
October2007
Mapping global capital markets 2011 (August 2011)
The 2008 nancial crisis and worldwide recession halted a three-decade
expansion o global capital and banking markets. Today, growth has
resumed, ueled by expansion in developing economies but also a $4.4
trillion increase in sovereign debt. The total value o the worlds nancial
stock, comprising equity market capitalization and outstanding bonds and
loans, has increased rom $175 trillion in 2008 to $212 trillion at the end o
2010, surpassing the 2007 peak. Similarly, cross-border capital fows grew to
$4.4 trillion in 2010 ater declining or two years.
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McKinsey Global Institute
December 2011Copyright McKinsey & Company
www.mckinsey.com/mgi
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