8/9/2019 SEB report: Risky investments still a good long-term bet
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InvestmentOutlook Ma 2010piv bkig - ivm gy
h d ud c h wld hdl h
u?
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8/9/2019 SEB report: Risky investments still a good long-term bet
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3Investment OutlOOk - may
Contents
rodcio ____________________________________________________________5
Sr ______________________________________________________________Poroio rg _______________________________________________________
Th: Th db brd c h word hd h prr? _______________ 11
Th: Rdrwig h i p ___________________________________ 1
Th: Mr p or r h xcpio __________________________ 1
Mcro r ______________________________________________________ 20
CL
Eqii ______________________________________________________________ 22
Fixd ico _________________________________________________________ 2
Hdg d _________________________________________________________ 2
R ___________________________________________________________ 2
Pri qi _________________________________________________________ 30
Coodii _________________________________________________________ 32
Crrci ___________________________________________________________ 3
Srg
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4 Investment OutlOOk - m ay
Thi doc prodcd b SEB coi gr rig iorio bo i i prodc. Ahogh h co i bd o orc jdgd o b
rib, SEB wi o b ib or oiio or iccrci, or or o whor which ri ro ric o i. i rrch i rrrd o,
o hod i poib rd h rpor d h dicor coid wihi i, or rd h dicor rig o pcic copi od o www.b./di-
cir. orio rig o x bco odd d o or idiid circc. prodc prodc rr id o ri.
Thir w ri, d hioric rr r o gr o r rr; i o c, o c xcd h iii o id. Whr
ihr d or o i i crii doid i orig crrc, chg i xchg r c ipc h rr. Yo o r rpoib or or
i dciio d o hod w obi did iorio bor ig h. For or iorio p ir i h ipid propc
or d d iorio brochr or d d or rcrd prodc, ib www.b.. cr o hod dic iord o or idiid
circc ro or SEB dior.
i u x: A cor o or rio Pri Big ofc i Lxborg, Sigpor d Swizrd o r obigd o piord o h x r ppicb i h cori o or ciizhip, ridc or doici wih rpc o b cco d ci rcio. SEB do
o proid x rporig o orig cori ig h o or proid cocrd horii wih iorio d wh rqird.
Hans PetersonGob Hd o Srg
+ 46 8 76 69
h.pro@b.
Lars Gunnar AspmanGob Hd o Mcro Srg+ 46 8 76 69 7
r.p@b.
Rickard LundquistPoroio Srgi
+ 46 8 76 69 7
ricrd.dqi@b.
Victor de OliveiraPoroio Mgr d Hd o S Lxborg
+ 6 6 [email protected]
Johan Hagbarth Srgi
+ 46 8 76 69 8
joh.hgbrh@b.
Carl BarnekowGob Hd o Adior T+ 46 8 76 69 8
cr.brow@b.
Reine KaseEcooi
+46 8 76 697
ri.@b.
Liza BraawCoicor d Edior
+46 8 76 699iz.brw@b.
Thi rpor w pbihd o M 8, .
co r bd o iorio d i ib bor M , .
Srg
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5Investment OutlOOk - may
The debt problems o industrialised countries
will aect the risk perceptions o markets or
a long time. The concepts o high and low risk
will gain new meanings. Knowledge, a compre-
hensive view and understanding are essential,
now that traditional truths about risk must be
questioned.
Th c crii i Grc h ocd io o gigic
bdg dci d i gor db oi,
i i Erop. Thi wi c h w r iw ri or
r o co.
For og i, h or or ow-ri i h b
qi poroio copod o hr i ro Norh
Aric, Erop d Jp. Nowd, i prcic ch
poroio priri cop grop o high idbd
cori h wi b orcd o d ohow wih hir db
prob. Rgrd o wh db roio rg h
choo, i wi c cooic growh. Toghr wih ow
iio d ow ir r, hi ipi dowid ri or
h crrci o idriid cori ddig o
h ri picr. Wh d o b ow-ri i i h
c ocid wih rhr high ri. A prdig hi h
occrrd.
Ch cd
od w ci d cooic word chrcrid
b db prob d ow cooic growh i h id-
riid ECD cori, copd wih bi br -
ci i d high growh i h rgig r (EM)
phr h codiio driig wh i high ri d
wh i ow ri r chgig. Mwhi rgig r
r do o or rhig h ior i ooig or.
r biio i o bid w-dirid poroio h h
good chrcriic d c proid b rr i
ci ci. r qio h ior
hod i whhr h x b o cor i or
b orc o r or corig ir d pricip
p h h o gob corporio i r
idr. Th wr w b h o corpor bodr prhp or rci h o gor bod
ro ri dpoi. Th i i or ipor h r o
diri propr d o h h righ ic pproch.
Wh i ow ri? Th wr o h qio c h
o do wih ior. i bo hig owdg d
coro, w coprhi iw o h cor w c
drd h c or i. For xp, od i
i or ipor o ii rgig i rio poroio
h o pp rdiio diricio bw go-
grphic r. Ai o drig driig orc i or
ipor h i h b or og i. Prdoxic, o-d i i w-d, corrc pricd pri
qi d b ri h gob qii d wih
h wrog crrc xpor.
Fcu d dd
For good ro, w r doig o o pc i hi i
o Investment Outlooko qio bo ri d idbd-
. Tod h r pio i i g.
Db prob i idriid cori wi c ro
h rdiio occp o o pc i crii
poroio. Th ri i i i bc w bi h h
ro o ri d h w h r hdd b poroio g-
r b rd. Th rdiio ocio hod
poig corrio bw h r bd o og
i ri do o proid h who wr od. d
or i-dph drdig i dd o b o bid
good poroio. Th driig orc bhid r pric rd
b xpod. Trdiio rh b qiod.
Th r dobd xciig w i i h rqir
w pproch o ri.
Hans Peterson
CIO Private Banking and Global Head o
Investment Strategy
iduc
New times new approach to risk
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6 Investment OutlOOk - m ay
Sr
exctd 1-ya
rasoningtun isk
equitis 9% 17%
POSITIVE.There is a short-term risk o corrections due to fscal worries and as macroeconomic indicators
stop providing upside surprises. But urther along, low ination and moderate growth may drive OECD
markets. Eastern Europe and Asia will continue to beneft rom higher economic growth. The euro zone isleast attractive, with the worst growth potential.
Fixd incom 6%* 6%
POSITIVE or High Yield,NEgaTIVE or government securities. Company profts will strengthen and bankruptcyrisk will decrease corporate bonds remain attractive. High Yield bonds with large spreads over governmentsecurities are the most appealing. Government bonds in emerging markets, with their high yields, are also attrac-
tive. Swedish government securities will continue to provide minimal returns and continue to risk interest rate
hikes.
Hdg funds 8% 6%
POSITIVE. The prevailing tensions between and within asset classes provide continued good potential or
hedge unds. We will continue to ocus on quality managers in the Macro, CTA, Relative Value and Fixed
Income strategies, while Event Driven is becoming increasingly attractive.
ral stat 5% 3%
WaIT-aND-SEE/POSITIVE. Capital is seeking out quality properties. Better general economic conditions
and lower unemployment will beneft this asset class. Monetary tightening and possible bubbles in China
constitute risks.
pivatquity 15% 22%
POSITIVE.The number o private equity (PE) transactions will continue to increase in an environment o
low valuations. The secondary market is attractive when fnancially pressed investors are orced to sell atdiscounts. Listed PE still has room or sizeable upturns.
Commoditis 5% 18%
WaIT-aND-SEE.Lower growth ahead in the OECD countries will reduce demand or industrial metals, whilelow real interest rates will keep demand or gold up. Agri-commodities will be squeezed in the short term,
but higher ethanol production may boost the price o maize (corn) and other crops urther ahead.
Cuncis 5% 3%
WaIT-aND-SEE/POSITIVE. Interest rate dierentials will continue to drive currencies. Export countries such
as Sweden and emerging market countries will see their currencies appreciate, while the euro will be pushed
down by large government debts. China will begin allowing its currency to appreciate during 00.
* Expected return on corporate bonds that are weighted about /3 Investment Grade and /3 High Yield.
XpCD ik D U ( y OiZO)
iOiCL ik D U
(my , O piL , )
Cg i OU XpCD U
Equities
Fixed income*
Hedge funds
Real estate
Private equity
Currencies
Commodities
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
0% 5% 10% 15% 20% 25% 30%
Expected volatility
Expected
return
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2008-11
2009-02
2009-05
2009-08
2009-12
2010-02
2010-05
Equities Fixed income* Hedge funds Real estate
Private equity Currencies Commodities
Fixed Income
Equities
Private equity
Commodities
Real es tate
Hedge funds
Currencies
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
0% 5% 10% 15% 20% 25% 30%
Historical volatility
Historicalreturn
iOiCL COLiO
(my , O piL , )
Equities
Fixedincome
Hedgefunds
Realestate
Privateequity
Commodities
Currencies
Equities 1.00
Fixed income -0.0 1.00
Hedge unds 0.3 0.2 1.00
Real estate 0. -0.13 0.2 1.00
Privateequit
0.5 -0.1 0.2 0. 1.00
Commodities 0.2 -0.11 0.2 0.23 0.31 1.00
Currencies 0.1 0. 0.5 -0.01 -0.03 -0.02 1.00
Hioric r bd o h oowig idic: Eqii = MSC AC Word. Fixdico = JP Morg Gob GB Hdg. Hdg d = HFRX Gob Hdg Fd. R = FTSE EPRA/NARET Dopd. Pri qi = LPX. Coodii = S&P GSC
TR. Crrci = B rcHdg Crrc Trdr.
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7Investment OutlOOk - may
Sr
Wig i mOD pOCiO
Wig i mOD gOW
1%
5%
0%
0%
2%
10.5%
81.5%
0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Cash
Currencies
Commodities
Private equity
Real estate
Hedge funds
Fixed income
Equities
Previous Current
1.5%
4.5%
4.5%
3%
3%
30%
28.5%
25%
0% 10% 20% 30% 40%
Cash
Currencies
Commodities
Private equity
Real estate
Hedge funds
Fixed income
Equities
Previous Current
Wig i mOD ggiv
OLLig -mO COLiO v. mCi WOLD
(U)
0.5%
0%
4.5%
11%
0%
23%
26%
35%
0% 10% 20% 30% 40%
Cash
Currencies
Commodities
Private equity
Real estate
Hedge funds
Fixed income
Equities
Previous Current
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
2002 2003 2004 2005 2006 2007 2008 2009
Fixed income Hedge funds Real estate
Private equity Commodities Currencies
m: Db bUD C WOLD DL
pU?
Norway
Canada
France
US
Italy
Greece
Finland
DenmarkAustralia
SwedenGermany
Netherlands
Spain
Ireland UK
Japan
-15
-10
-5
0
5
10
15
0 50 100 150 200
Public debt (% of GDP)
Publicsurplus/deficit
(%o
fGDP)
m: DWig ivm mp
US (50%)
Japan (10%)
UK (10%)
Other (30%)
For countries with large government debts and public sector de-
cits such as the US, Greece, Italy and Japan tough years o debt
resolution lie ahead.
The MSCI World index is oten used as a benchmark or global
equity unds, but 70 per cent o its exposure is to three countries
and the EM sphere is missing.
h d ud c h wld hdl h u? Th db oi i h W rgh rg or rgig
r xpor
dw h : Wh w high ri i rd b ow ri oorrow, or xp i rgig
r
m u ul h xc: Th wr priod i r i probb j p drig h b r o cch
or brh
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8 Investment OutlOOk - m ay
pl
MDERN PRTECTN
Dpi occio oi r, hi poroio prord
w drig h r w oh o . Sic h prir
prpo o Modr Procio i o prr h o
cpi, i rr o r o pr c drig h r hr
oh b coidrd icor, gi h r ci-
. W o o h prcic hodig coribd o
h poroio poii rr d h o hodig oid
hi rwor.
Brodr xd ico d (ch p or o rr)
r coiig o dir good rr, og wih or
corpor bod d hodig, boh Grd (G)
d High Yid (HY). r crrc d i o
bg o corib o or prorc. h hdg dporio o h poroio, howr, ho d h dhr o
h Eqi Mr Nr rg h o r xpc-
io, d h hodig b rcoidrd.
Nw drig h priod i h w r chooig o bgi i-
ig i r . or jdg, hi c hod b
b o r coribig poii o or rr, whi iro-
dcig ohr p o ri d rr orc o h poroio.
W o or h h ow ri pro o hi c wi
w io h Modr Procio i phiooph.
h who, or xiig ix o i i icor.
Th poroio i dirig rob rr ow, co-
rod ri. Epci i ri-djd r, w r id
wih i prorc.
Portolios or shiting nancial winds
2%
81.5%
1% 5%
10.5%
Cash
Currencies
Real estate
Hedge fundsFixed income
In our Modern Investment programmes, we apply our approach to markets and asset classes in
practice. The turbulence surrounding the scal crisis illustrates the value o the guiding principles
governing our asset management: diversication among several asset classes and the ambition to
capture long-term trends in economies and markets. Despite extreme market uctuations, long-
term conditions have not undamentally changed. We are thus sticking to our balanced investment
tactics, holding decent proportions o risky asset classes such as equities and private equity, com-
bined with more stable investments such as real estate, corporate bonds and hedge unds. Among
minor portolio adjustments worth noting are a small risk increase in our Modern Aggressive porto-
lio as well as the expansion o our real estate and emerging market debt holdings.
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9Investment OutlOOk - may
mOD gOW
A h word coo coid o rcor, h Modr
Growh poroio ro b or h hr pr c drig
h r qrr o . Thi poii rd o coidi Apri. hodig r o cd b h or cod
h h icd h ci r i rc oh,
b gi i good ri diricio d i o r cc
choic o i, h poroio h prord w. Th
c h h coribd o o i rr r
qi d xd ico i, oghr wih pri
qi d hdg d. Coodii d crrci h
prord icori o d.
h og r, w xpc h word coo o rcor
rg pd, b i h hor r or cod wi -
ow roo or dippoi. h Modr Growh poroiow r w prprd or hor-r rr, whi ig
i h c pror icori i i o poii
r. h g-o-wr bw hor-r cocr d
og-r poi, w ri i boh cr poii -
id d xggrd pii.
W r riig or crr xpor o qii, which
icd hodig i boh rdiio gob d d i
br o brod rgig r d. h xd ico
porio o h poroio, or xpor o crdi ri ir-
wi ri i pc, b w r ig chg
b rpcig Grd Libor (hor drio) wih
Ergig Mr Db.
Th hdg d porio o Modr Growh i dirig good
rr, d i biiig c o h poroio gi good
opporii o ri i ohr c. W orcoid word io i c, boh bw
c d rgio. Thi hod proid good oppor-
ii or hdg d. Gob Mcro, CTA d Eqi
L/S r rgi h hod b b o pror w i h
r, o w r chooig o ri h hodig. Th good
r o proid good poi or Mirg, d w
r o chooig o p ch i. W r ig
rgi pwrd dj i or rr xpcio or
hdg d.
R i ri w c or i Modr
Growh. W xpc i o b b o dir good ri-djdrr hd d o proid biiig c i h poro-
io. Hr w r ocig o or b propr i
wih phi o ch ow. Cri high-ri propr
i projc igh o b rci, b r o i-
b i hi poroio or boh ri d iqidi ro.
r crr poiio i id pri qi, which w r
chooig o ri, h coribd good rr o r. W r
rchig or copr i i hi c,
b hi i difc bc o iid iqidi.
Poroio rg
3%
3%
1.5%
28.5%
25%
4.5%4.5%
30%
Cash
Currencies
Commodities
Private equity
Real estate
Hedge fundsFixed income
Equities
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10 Investment OutlOOk - m ay
Poroio rg
mOD ggiv
A h oriio o r d cooi h pro-
grd, w h cci cd h ri i h Modr
Aggri poroio. r iio i o grd icr riwh w rgrd hi ib.
W r ig chg h o: rpcig
corib dbr hodig wih qii. Sic h di-
co h w w xid i h corib hodig wh w
bogh i h dipprd, w r rpcig i wih qii
ic h ri i rg h , b h poi i br.
Thi pproch o pr h g o h Modr
progr. W oc o i wih h
poi or h b ri-djd rr whi ig o
dg o owh rgr r hi.
h qii c, rg proporio o h poroio
i coi o rgig r. Thi h word
o ic, boh i i d crrc r. orh
o h gi o or EM d r ribb o crrci.
W c h h xiig growh i h word coo i
coig i ro rgig r, d i i r o b
id i h r.
Ahogh hr i roo o icr h ri i h poro-
io, h dciio r ir i hr i ooh cioig
ri diricio. A ri rg proporio o i
i h Modr Aggri Poroio i i xd ico; how-
r, h r i h h o qi-i rr
xpcio, b owr ri. Thi proid wih good
chio i h poroio, b ooig bi rhr hd w
or h w hod owr hi proporio o b o
gr h rr w r iig or bi
cc. Aog corpor bod, or High Yid hodig r i
prorig odig; h r, icid, good i-
i o r iio. W h p o cor-ib dbr, ic h r xpcd o h coid
good rr poi.
h hdg d d, w h cho d h r bi
or ggri. W o h o hodig i hdg d
o or b r d xpc o c h iz o h
hodig i h coig qrr whi big or i
hdg d. W r cig dic prob, ic o o
or hdg d h cho o op ccpig w dpoi.
Thi i r good, ic h gr or ri
h i iz cod dr c prorc. Sic h d
i cc, w r riig or hodig d h -whi od qid ri or r i.
Th r i w h d i h ohr
Modr progr do o i p o h rr
xpcio h gor Modr Aggri, which i wh w
h o r i i hi poroio. Thr r i-
dd w-gd opporiic r i h
h good rr poi, b hir iqidi i gr oo
poor or hi poroio.
Pr coodi i h o coribd hig
hi r. d i h i b coodi hr h
h rcordd gi, d w iid or coodi hr
i o oh go. rropc, w did o bi
oo r. Thr wi dobd b w opporii o
i i coodi hr gi, b h o w r
hodig o.
23%
11%
26%
35%
0.5% 4.5%
Cash
Commodities
Private equity
Hedge funds
Fixed income
Equities
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11Investment OutlOOk - may
h:
h d ud c h wld
hdl h u?
Beyond Greece, massive government debt
mountains loom
While the Western world grapples with its
debts......
... economies in the emerging markets sphere
are running in high gear
Wih gor db o or h pr c o GDP
d bdg dci o r pr c, Grc crd h
digh o o h oc, xd ico d orig xchg
r. Er i M, Grc rchd gr wih i
ow ro zo cori d h rio Mor
Fd (MF) o o oig EUR biio. Th cor
o h rrow cpd dig. Th ph o
hi gr w og d widig or boh poiic d
ci ro. A hir p, wo-r Gr orig
bod id cibd o r pr c. Nor i i poib o
dcr d o h rgc, hogh h EUR 7 biio
ci pcg r id b h Erop Uio d
h MF oidd iqidi crii i Erop.
Thi o c wo ir h chg h
Wr cori c. A r o i c i
poici chd idi r h Lh Brohr
hoc i Spbr 8 d drig h dp ci dcooic crii h oowd, h G7 cori wi coci
h icrd hir cr gor db o rcord-
high pr c o GDP b h d o . Wh, h, wi
b h ipicio o hi db prob? How wi i ipc
h gob coo d h r?
g d ul u h c
For gor o b i db i ohig or h
or copi o c hir ciii b borrowig. J
copi ooh hir iqidi d d rdc hir id-
p cpi hrogh db cig, gor c ooh
hir crr d r cpi ow rqir. oh ro bhid od gor db prob i h
rcr db h grd grow.
Ar h word hd drgo dprio d word
wr icdig jor cooic cio h rd i
oro oci coqc h id o cooi JohMrd K gid grod. H docd ci ro
or gor i oohig cooic cc; h d-
cocp w h gor hod id ig
i good i h bd i o pr xpior c
poic i ogh i. hi w, h gor cod
h dr cooic d oci coqc o cig
cooic codiio.
Priodic rp d dci i gor c r
rd o h ccic r o h coo. Drig boo
priod, x r ri d po , whi
cooic dowr d o highr po, owr xr d high oci wr xpdir. Th ccic
rp d dci corib o dcr d icr i
o gor db h coo c.
Howr, h poiic ici o rdc xpdir dr-
ig cooic boo r r h h ici o
boo xpdir i ogh i. h r-p o cio,
or r ro hr i o wiig o ri x
d ri gor bidi. Bor oci biir ch
po irc wr irodcd, rp d
dci or or o ch ohr drig cooic
cc, d gor db dd o b ir b pr-
cg o GDP. B h wr xpdd, h ccic
porio o gor db did o ih drig co-
oic pr. Srcr db h pr h pri hrogh
h ir cc h h cci xpdd.
xc d c l
Exci rg cr gor db d o
prob. rdc codc og ior h co-
r wi b b o i p obigio, which d
o owr crdiworhi d highr ir r or bod
id. B cor highr dig co, d h pp
o iqidi hri or boh pri idiid d bi.
Ui hi hpr pri copio d bi-rd cpi pdig, hrb owig cooic growh.
d (Rihr d Rogo) how h GDP growh
In the shadow o the debt mountains
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12 Investment OutlOOk - m ay
b o prcg poi wh gor db rch 9
pr c o GDP.
Wh, h, i good o gor db? Th i-rr or o ip, righorwrd hodoog or
ccig h opi db . Dpdig o h od
d prr, or xp, opi US db c b i-
d whr ro o 66 pr c o GDP. Accordig
o h Sbii Pc, EU cori r ppod o r h
gor db i bow 6 pr c o GDP, which h MF
d h Word B o rgrd h ppr ii or od
gor c.
Howr, hr r horic gidi or wh od
o gor db :
. A ib og-r c poic r x r
hod b cpb o dig r ir d pricip
p. og-r gor c r xpcd o
d p ibcd, h pri cor ri rdcio i i
copio d wi or, i icipio o highr
r x brd.
. Roo or cor-ccic c r iod
bo, db hr o GDP ri drig ccic dowr.
cor h high iii db , cooic dowr
wi r i highr idbd d roo or
c i. ch iio, i h gor icr
i db, hi h dr coqc icdig owr og-
r growh.
. Coribig o cooic xpio rob o
gor db b growh bc rgr br o
high-rr projc c obi dig wh r ir
r r ow. B xci high db, wih h ccop-
ig highr gor bod id, wi c cpi o
br xd ico ri o gor crii. Thi
wi crowd o fcic-riig pri i.
il u c l uc
For h bo-iod ro, cori wih ow iii
gor db brd c ch or powr ci r h h grr ipc o hir coo-
i h cori wih high iii gor db. A
grop, bor h ci crii h idriid cori
hd gor db oig bo 6 pr c o GDP.
Lrg gor-cd bi-o d i r,
w owr r d highr xpdir drig h
ci d cooic crii, h d o xpodig gor-
bdg dci. Accordig o MF orc, gor
db i h ECD cori who wi rch pr c
o GDP wihi r.
E i i r i h Wr word wr wih-drw, pbic xpdir wod o b bo . pr
c o GDP. Looig hd, igoro d crdib cio
p o rdc pbic dci wi h b ipor i ordr
o cr codc boh i h ci r o cpi
wi h righ i d copi o h dr
o bgi hirig w po.
cox, Swd i hd p xp o co-
r h h prcid good crii g. h w o
h Swdih big crii o h r 99, h gor
iii chd rg id pcg. r ix r priod,
gor db ro b bo prcg poi o or
h 7 pr c o GDP. Ar h, h gor ip-
d dric b-ighig r which hpd i
bdg bc wig ro - pr c o GDP o r +4
pr c i h pc o r, b cooic growh w
r ow drig hi priod.
For h rgig r (EM) phr, h picr i ir
dir. A grop, EM cori rd h crii wih
gor db o o bo pr c o GDP. Th MF
i h h cori wi oo b bc h
Th: Th db brd c h word hd h prr?
Norway
Canada
France
US
Italy
Greece
Finland
DenmarkAustralia
SwedenGermany
Netherlands
Spain
Ireland UK
Japan
-15
-10
-5
0
5
10
15
0 50 100 150 200
Public debt (% of GDP)
Publicsurplus/defici
(%o
fGDP)
Db-bUDD COUi FC bL-igig
For countries with large government debts and
public sector decits such as the US, Greece,
Italy and Japan tough years o belt-tighten-
ing lie ahead.
8/9/2019 SEB report: Risky investments still a good long-term bet
13/36
13Investment OutlOOk - may
Th db brd - c h word hd h prr?
ri db . Th ci crii hd idr ipc o
h cooi h o h ECD cori, d hir ow
idbd owd roo or rgr i r.
uh ud u wll h wh
Cori h orco db oi h hr
i ri: iio, crrc dprciio d bdg
ri.
High iio c h o o o hri. ohr
word, h r co o o bco owr borrowr b-
h xp o dr. io c b crd b pri-
ig o, b ch or poic rg prppo
w-cioig big d high cooic cpci
iiio i ordr o h ipc. A iio c c
o b chid b o crrc dprciio i oi doid i h cor crrc d h o hi
crrc , iio i ipord d h co o h o
i r r.
Grc, Spi d ohr ro zo cori co pp
h wo ri, howr, ic hir ir r
i b h Erop Cr B d hir crrc i
r-io. For h cori, h ri or og
h bog o h ro i h hird ri
bdg ri.
Bdg ri i h hrd w. h gor
bgi o rp i db wh i h chid bdg rp
h r o ogh co-cig d x hi. Sdi ro
h Word B d whr how h growh i cr
or ib wh bdg ri occr i i
rdcio i pbic xpdir, coprd o icr i
x r. For xp, b cig bidi d riig h
rir g, cor boo i prodcii whi ipro-
ig i gor c. Sch r d o jor
poiic chg, howr, pci i cori wih
izb pbic cor.
r cocio i h cori h h od c o-
d wi jo highr growh r i h r h coriwih drd c. Th Wr word h c
r o bow-poi growh d h gigic chg
o rorig ordr o hir gor c. Aog h
b-poiiod Wr cori r Swd, Norw d
Cd, whi io o h priphr o h ro zo wi
c h bigg ri.
Gob pig, Ai cooi wi jo h high
growh or r o co, oowd b Li Aric
cooi. Er Erop wi grd pic p pd. Thi
dirc i growh r which wi h b pid b
ECD db prob wi c coid ow o cpi
o h EM phr, whr h growh ooo i b. A i
h cori wi ri i , d boh c d or
poic ighig wi b ipd i i Ai d Li
Aric o o orhig. Th crrci o EM cori
wi h pprci ri o ho o Wr cori. Thi
wi hp rdc xpor dpdc i EM cori d -corg growh h i dri b doic dd.
ECD cori h oow h rpoib ph o c b-
c bdg ri d h h ow cpci ii-
io d high po wi how ow ir r d
ow iio. h o h odr cooic growh, h
oc r i h cori b. Cori h
choo h iio ri or r b o g hd
o hir gor c, howr, wi high iio
copd wih riig bod id cr orb -
ri or qii.
Th hdow o h Wr db oi h riorc
rg i or o EM xpor i rio or r
, qii, crrci boh di- d og-r.
-6
-4
-2
0
2
4
6
8
10
12
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
World Industrialised countries
Euro zone Central and Eastern Europe
A sia ex Japan, Korea Middle East and North Afri ca
i i ig g
According to IMF orecasts, real GDP growth will be highest
in Asia, at more than 8 per cent annually during the next
several years, compared to less than 2 per cent in the OECD
countries.
8/9/2019 SEB report: Risky investments still a good long-term bet
14/36
14
h: dwh
Traditional risk-spreading alls short
Emerging markets no longer so risky
Currency movements will play a major role
Ui h r 98, h i ib i r-
i wr qii o doic oc xchg d xd
ico i i oc crrc. Sic h, h pc o
dop i h ci d h b xpoi. Tod
ior h r iid rg o ri pc o
p hir o.
Th w ri proid br poi or grig
good rr. B h i h r or copx, r-qirig w owdg d iigh io h ri d oppor-
ii o h i. To o x, coio
pio bo ri, qi d poi rr o
c b coidrd owh odd. r i
h i h r r, w wi c ohig o prdig
hi, whr od rh wi b rd. Sch hi wod
rdrw h i p d d o chg i h pricig
o ro i.
bd qu ud d
coio pio i h rdiio brod go-
b qi d proid h b ri-prdig i qi
poroio. Thi id h brod qi d icd
xpor o rio r h do o h h
pr o rr (h ow corrio). h chi
diricio, which rdc ri wiho dcrig h
poi rr o h x. Thr i o dob h
diricio i powr oo or owrig poroio ri, b
wh w c b cpic bo i whhr gob d, or
xp, i c h b w o chiig ri-prdig i
qi poroio.
Eqi d gr gr d o o dirg o or-
gr x ro hir bchr idic. Coq
gob qi d o h ocio iir o gobidx, which i r i bd o h r cpiiio o
rio oc xchg. Th gob idx o rq
d bchr i h MSC Word dx. Th hr co-
ri rprig h rg xpor i hi idx r h
Uid S ( pr c), Jp ( pr c) d h UidKigdo (9. pr c). Ergig r (EM) cori r
o rprd . A ior, o hod b cpic
o whhr hi c rpr good ri-prdig,
ic 7 pr c o xpor i o o hr cori d h
EM phr i iig.
Th qio i high r, pci i od r
ci chrcrid b grr oc o cor ri. Th
cooic oc o cori h bco r ipor
ri prr i i dciio. Thi i dord,
i pricr, b priig r cocr bo Gr
gor c. A pr, o cori bor-
row highr ir r h crdiworh copi p.
or h rgrd corpor bod or rib h
gor bod. Th c h cor ri i highr
i o c h crdi ri how h h r h r-
d i iw o ri. Wh, h, i h o h co-
ri h ior d o b xpod o i gob d?
cu c xuGrc i r ro o i grppig wih prood dci
prob. Mo Wr cori r chrcrid b dwi-
Old truths mean big risks
US (50%)
Japan (10%)
UK (10%)
Other (30%)
big OCD COUi DOmi mCi WOLD
The MSCI World Index is oten used as a benchmark in tradi-
tional broad equity unds. The index is 70 per cent exposed
to three countries, and the EM sphere is missing.
Investment OutlOOk - m ay
8/9/2019 SEB report: Risky investments still a good long-term bet
15/36
15Investment OutlOOk - may
dig ch rr d o h xpi gob rcio d
gigic i pcg o rc r. Aog h co-
ri wih h bo w gor c r
h US, Jp d h UK. Thir bdg dci r , or r, pr c o GDP (Grc pr c). Cr gor
db d pr c o GDP i Jp, or h 9
pr c i h US d 6 pr c i h UK ( pr c i
Grc). h UK, h pri db brd o bi d
hohod i o og h high i h word.
Th ci iio o cori h bg o ic
ior dciio d i h hig ipc o rio
r. Erop, or xp, hr i cr d
oicb cocio bw cor cooic hh
d h prorc o i oc r. or diigih
bw h cooic poi o dir cori dbi h copi oprig i w cooi wi b
dr cd.
Th rr o hr i drid i h og r b
cop pro d xpcio bo h r rd o
pro. B pro r, i r, dpd o h drig
cooic prorc o h r whr copi
opr. Copi i db-ridd cori ri cor-
ig dd d highr x h copior bd o
cooi h r o or b grod. i ipor,
howr, o poi o h hi priri ppi o copi
h i h doic r. Expor copi h
hir prodc i r whr dd i high pror
br. Low cooic growh hod dow bor co, d
cor w c c i crrc o o ,
crig copii dg or xporr.
i cr h h gigic gor db h h c-
cd r hrig o hpr GDP growh i db-
ridd cori or r o co ( pg -).
Thr i h ro o h h oc r i h
cori wi o b wighd dow i h og r. A
qii poroio ocd o h bi o h r cpii-io o oc xchg h ppr o b ri high
ri i. Diricio rg occr bw hr
cori h wi c oro cooic chg or
r. pi o hi, qii poroio copod o
hr i Norh Aric, Erop d Jp i rgrdd
i wih ow qi ri.
u ch
Aohr cr didg i h h rpid growig EM
phr h i or o wigh i o gob qi d.
A jori o EM cori h dord ipri
growh gr, hogh h gob coo h rdi wor cooic p i iig or. ddiio, h
growh o gor db i EM cori h b coid-
rb owr h i h ECD cori. A ggrgd
, EM orig db i qi o h pr c
o GDP.
Th EM phr h hioric b cgorid high
ri i, b od ior hod qio hi od
rh. Thr r i br o EM cori h r chr-
crid b corrp gorc, o-xi dcio
opporii d cooi o h bri o ri. B h
cori r bcoig wr d wr, d gr p-
ig h EM phr i o bi or b grod h
prio.
Th o coo r o ri i ci hor i
oii, i ohr word h riio i rr or i.
High oii d o grr cri bo wh rr
i wi proid, which h i i high ri
i. Hioric, EM oc xchg h hd co-
idrb highr oii h ECD oc xchg. B i
rc r, oii i h EM phr h o h
i h ECD. Th ri o qi i i h EM
cori h h diiihd.
Th iprod oc o EM cori i o rcd
i h crdi rig ro irio gci. Drig h
p ix oh, h rd h b owrd or d or
rig pgrd, i wh h gob coo h b
i dp rcio. Howr, Wr cori h
hir crdi rig dowgrdd i h rh o h
ci crii.
Thr r rio ro o wodr bo h cicio
o EM i xr high ri. Wh ior
r hi iw, h rci o EM wi icr
wih riig pric coqc. or hod,
howr, b wr h poiic ri i i highr i h EM
Th: Rdrwig h i p
Government debt as a percentage of GDP
Developed economies Emerging economies Nordic countriesSource: OECD, SEB
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
30
40
50
60
70
80
90
100
110
30
40
50
60
70
80
90
100
110
SEB forecast
Lg Db bUD i OCD
Due to the global economic slowdown and the launching o
gigantic stimulus packages, central government debt as a
percentage o GDP has increased dramatically in the OECD
countries. In the EM sphere, however, indebtedness is low.
8/9/2019 SEB report: Risky investments still a good long-term bet
16/36
16 Investment OutlOOk - m ay
cori h i dopd Wr docrci. ddiio,
ior d o oid priphr r wh cod wid
bow, d h EM phr i i rgrdd big dh opic i poroio.
Cuc
Crrc o r ohig h ior do
o ch ch gr iporc o wh chooig whr o
p hir o, b h i ir h gid
icrig gob diprio, hi cor h bco icr-
ig ipor o br i id.
Sic d gr d ohr ior do o gr
crrc-hdg hir poiio, rg proporio o ri d
rr wi dpd o wh hpp i h orig xchg
r. Hioric, hr pric o bo wic ch xchg r. ohr word, h oc r h bo
wic h oii o h orig xchg r. Th o
hird o h rr o qi i i cor wih
ohr crrc i drid b crrc o.
or jdg, h d rgh o cori wi
bco icrig ii driig orc i h orig
xchg r drig h x w r. Cpi wi oid
cori i ci difci d o, pci, o EM
cori whr growh i highr d probii rgr.
W o prdic h ig dg o ir r di-rc wi b rog driig orc; ior wi borrow
whr ir r r ow d i whr h r high.
Th r wi b dowwrd prr o ow-ir crr-
ci, whr h crrci o cori wih high ir
r wi pprci. Tod h ir r diri
bw cgori o cori r rg, d h wi wid
rhr. h o id r h ECD cori, whr h
ighig o ir r i big popod. h ohr
id r EM cori, whr ir r h b
rid ro rd ir high . r picr o r
rd i h orig xchg r h proid ohrro o r qi poroio wih rg xpor o
db-ridd cori.
A ior, o hod o br i id h crrc
o ic h prrqii or cor
copii. For xp, h wr ro h bd
h rd rog Gr xpor cor o b ro w
gid copii dg ( pg 4-).
D w d
hi h ric, w h chgd coio -
pio h r o rgrdd bo rh. For
xp, rdiio gob qi poroio d o proidgood ri-prdig, b rhr h oppoi. W h o
xid cor h r ipor i ig w-odd
i dciio.
Fd, i i r o big wr ior o
wh ri o i xpod o d h ocig o d o
chi h b ri-djd rr. Howr, h r i
iig big, o ohig h w high ri rd
b ow ri oorrow (or xp EM ).
Diricio ri h b oo or chiig high ri-
djd rr. B h choic o i or chiigri-prdig i r ipor. Th h rc i
or word r h o w r iir wih d h h high
pprciio d good probii.
W crr bi h good ri qi copi,
EM orig bod, High Yid bod d h codr pri-
qi r.
Th: Rdrwig h i p
J.P. Morgan G7 currency volatility indexVIX volatility index for US equities
Source: Reuters EcoWin
2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
90
Percent
0
10
20
30
40
50
60
70
80
90
Equity market
FX market
CUCy impC
The volatility o the stock market is about twice
as large as that o the oreign exchange market.
Thus one third o the return on an equity invest-
ment in another country is determined by currencymovements.
8/9/2019 SEB report: Risky investments still a good long-term bet
17/36
17Investment OutlOOk - may
It is easy to be blinded by a positive market
mood and macro statistics
and view the world with excessive optimism
Risk asset markets enter a calmer phase
Righ h bgiig o 9, h pii og boh
ior d orcr w rig. M drw pr
wih h dprio o h 9, d o who drd o
prdic brigh r or r d h or coo
w rgrdd rioo d . B o i b-
or, ho who drd h i o chg coio
iw d rd o o b righ. A pric r or ri
qii, corpor bod, hdg d, pri qid o o bg drig h cod qrr o 9.
J h xboo , h coo biid ir oo
hrr. rio cori or xp h Uid
S ccic rcor d drig h hird qrr.
Th coo h rbodd -6 oh r h oc
r, i w ppod o.
Th cooic pr w r cord b iic o-
wrd h d o 9. Toghr wih igic co-cig,
hi bd corpor pro o ri w, whi irr i o idriid cori rid hioric
ow. A r o hi orb cooic iro,
pric o ri coid hir pwrd jor. Grd
h h cr bri rd dowwrd j r h bgi-
ig o wh h c i Grc w rd d
Chi oo p o igh i cooic poici, ior
did o ow h o b crd or og i. d
h prig o w doid b rog r i ri -
r dpi ocic h cod d icrig
worrio c iio i Grc.
Wllulld llTh i or h prig r w rpriig good cor-
por rig d highr growh xpcio, boh og
cro orcr d r pr. For h r i i hi
pr cc, h r r r h h cooi wh
i c o riig h r pwrd. Siic or Mrch d
Apri o ppord h picr o ccrd growh i
pr o h word coo, r growh hd owd r i
pr rd o whr.
The time has come to catch our breath
h: mu ulh xc
UK, PMI ManufacturingEurozone, PMI Manufacturing US, PMI ManufacturingChina, PMI ManufacturingSource: Reuters EcoWin
2005 2006 2007 2008 2009 2010
30
35
40
45
50
55
60
65
Index
30
35
40
45
50
55
60
65
pigim FO pUCig mg
In many parts o the world, purchasing manag-
ers in the manuacturing sector indicate that the
wheels o industry are turning aster. The biggest
upswing is in the US, but in Europe and China the
expansion has also gained strength.
8/9/2019 SEB report: Risky investments still a good long-term bet
18/36
18 Investment OutlOOk - m ay
Aog ohr, prchig gr i h US, Ai d
Erop idicd iprod codiio. Exporr i h
Erop Uio cor cori gid gob copii-
wh h ro rcio o h Gr crii.Cori i Chi, Sigpor d di rpord ccr-
ig GDP growh. Aric cor dd prdicio h
hir ig rio wod ri. d h bro io hir pig-
g b o h cod icr hir copio or h
hir ico prid. Th ood o hohod iprod
i h US, Jp d h ro zo. Siic wd o
hop h h dp dprd Aric hoig r
which rg riggrd h ci d cooic crii i
o i w owrd biiig.
Howr, i i o b bidd b chr r d poi-
i cro iic d h iw h r wih xciopii (h xc oppoi o r 9). i o org
h hr r chi h c h coo o
chg gr wih rhr hor oic. Th ppi o h
c h ccrig cooic growh o c h
gi pc.
cl c hd wh
qio i how ch o hi cooic growh i d
o h rrod i h ior cc d c i
r, d how ch i coqc o icrd -
drig dd ro hohod d bi. For x-
p, i h US h hi ro ior cbc o USD -6
biio i h cod qrr o 9 o ior bid-p
o USD + biio i h r qrr o proidd poi-
i GDP coribio o r 6. prcg poi. Th
cor oghr wih h coribio ro Prid b
i pcg xpid or h h ir Aric
GDP growh drig h cod h o 9 drig
dd h d drig h r qrr o hi r h
coribio ro h wo cor ddd p o or h
. prcg poi o GDP growh, which od . pr
c. ohr word, drig dd idd ro r i
, b o b rod . pr c.
ori d c i r proppig p Aricgrowh drig h crr qrr w, d b o idic-
io h o coribio wi b owh rgr h i h
r qrr. Th pricr cor r ipor ro
bhid rogr rc Aric cooic iic. B i i
o o i h US h h orc h ipc. Poii
growh c ro rrod i h ior cc r
oicb i rg porio o h word coo, d bdg
i i o i proppig p growh i pc -
pci i h idriid ECD cori.
Th ccic bci c wi d drig h c-
od h o , howr. h US, probb rod hr
orh o h poii ipc o h ior cc h
rd occrrd, d r hi r h coribio o i-
or o GDP w b gi or priod, wh h pc
o bid-p ow; h i, h cod drii h chg
i h r o chg bco gi. Mwhi h
growh ip ro c i r wi o hiro p o i.
Thi cod did b o b corrpodig ccr-
io i drig bi d hohod dd. B
hogh h o rc cro d rc ch ipro-
, i i i h h wi b rg ogh coc-
io i r o h ECD cori who.
Dwu im ucu dx uull c
Drig h prig, h SM prchig gr idx or h
US crig cor h cibd bo 6,
ocid wih high growh. Hioric, howr, hi ph
h b ir bri d h o b oowd b dow-
r i boh h SM idx d GDP growh. For xp, hi
occrrd drig h rcori o h r 97, id-98
d r . Hr, oo i ohr pr o h bi
cor iori r p ipor ro, ic
wig ro cbc o bid-p ordiri c h ordr-o-ior rio o . Thi, i r, i ig o bi
o ow dow hir prodcio r.
i r h hr h b rog ociio bw
h SM idx, which i doid b rg copi, d
Aric GDP, b i rropc h corrio bw h
Nio Fdrio o dpd Bi (NFB)
bi idx d GDP i rogr. i, hi i
wrig ig, ic drig h prig h gp bw h
NFB d SM idx w h wid ic bi r-
bg i 974. Bhid h ow gr r h difci
xpricd b bi i gig b o d h
rg ro o h i-dprd corcio idr i h
NFB idx.
Th: Mr p or r h xcpio
FiCL imULU D ivOi biD U
gOW
During the latter part o 2009, more than all US growth
in GDP was due to scal stimulus and a turnaround in the
inventory cycle. Looking ahead, the economy will have to be
more sel-sustaining when these eects ade.
Annualised
Inventory contributionNet effect of stimulus
GDP growth
Source: CBO, Recovery.gov, SEB
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
09 10 11
-2-1
0
1
2
3
4
5
6
-2-1
0
1
2
3
4
5
6SEB forecast
8/9/2019 SEB report: Risky investments still a good long-term bet
19/36
19Investment OutlOOk - may
Th: Mr p or r h xcpio
cor bhid hohod dd i h rd o
ico, which i r i dpd o wh hpp i h -
bor r. idriid cori, h bor r-
wd prcpib drig h ci d cooic
crii. Thr r idicio h po wi o
grow ogh i h x wo r o ph dow -
po ch. r hi wi r i ow ico growh,
which wi prb hpr pri copio.
Thr r h ro o prdic h h priig
ECD pwig wi b oowd b dcrio r i .
B ch cor o do o o b pr o h
orc o r pr d h coi r ri
i h coig oh, o op o worri bo gor
c pci i Erop.
h wh h c
A pr, r pr h ro o b pd wih h
rog crocooic d. B i co b rd o h
h wi grd bgi o worr h high growh h
grodwor or iio ri bi rhr hd hogh o
jid ccordig o or d h xpcio
o ccrd ir r hi i ii coriwi h gi oohod.
Dop i Chi ic h o 9 wh h
oc r hr bg o o grod coprd o word
idic how wh c hpp wh h r hi ro
iig o diiig rog cro gr. Wh h Chi h
ipd hir r cooic ighig r r
i , hi o o dr cd h oc r i
Chi b o hoo ohr oc r. Aohr xp i
ro 97, wh xpcio o US ir r hi cd
W Sr hr pric o r pr c. Worri
bo h gi pc o ccrig cooic growh
iio dgr d ccopig cooic poic igh-
ig r h o ri cor o br i id.
r bic orc i h h crr ECD ccrio or
h ro dicd bo wi o coi og ogh
or iio xpcio o prd igic. A odr
dcrio or cop o qrr i o, b idicio, r r ri h cig pric d ir r
xpcio, b p i i o h ipc o
pric d icr cri or i.
i or o r h xcpio h pr i ri
r occio p or brh. Sic h crr b
r bg i Mrch 9 d i hi prig, or x-
p, oc r h go hrogh hr porr dip:
o rod id-9, o r i d o r i M.
Looig rhr bc i hior how h ic 97, qi-
i, corpor bod, hdg d, pri qi d d
coodii h ordiri rd wr ph whh ccic rcor h b dr w or r qrr.
Wh h coo h rig coid o grow, r
whi ri pric h bg w pr ph h
h d or og i. US xcpio w i h r
98, wh ccic dob dip occrrd d o hrp ir-
r hi id cobig high iio.
Aig h h ECD growh p r hi r h i
iib i or cr b wi b id d bri, wih coid
ow iio, o ir r worri wi g oohod d
c prob do o c dric, wr priod
i ri r wi o b p or brh i b
r h pri or ohr cop o r.
OECD weighted leading indicatorsMSCI World Net index, change y/y
Source: Reuters EcoWin
1980 1990 2000
Indicator
85.0
90.0
95.0
100.0
105.0
110.0
Percent
-50
-30
-10
10
30
50
CLO Lik bW OCk mk D COOmy
It is a well-known act that the stock market is usually a step
ahead o the economy during both upturns and downturns.
This connection is underscored by the largely simultane-
ous turnarounds in the World Index and leading economic
indicators in the OECD countries. History also shows that the
initial strong rebound is ordinarily ollowed by something o
a pause, which in turn is ollowed by strong periods or both
the stock market and the economy.
Index of Small Business Optimism PMI ManufacturingSource: Reuters EcoWin
1995 2000 2005
Index
80
85
90
95
100
105
110
115
Index
30
35
40
45
50
55
60
65
ppy big Fim, gLOOmy mLL Fim
The American ISM index, which has climbed sharply since
last autumn, is dominated by large companies while the
NFIB small business index has recently allen rom a lowlevel. Difculties in obtaining bank loans are one reason.
8/9/2019 SEB report: Risky investments still a good long-term bet
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20 Investment OutlOOk - m ay
mc u
Economic upturn with EM countries in the
drivers seat
Small rate hikes in major OECD countries,larger hikes in small countries and EM
Growing public sector imbalances and
postponed economic burdens
Th word cooic pr h gid rgh d i ow o
rr grod. Gob GDP wi icr b or h 4. pr
c boh hi r d i . Th Ai cooi wi co-
i o b ipor driig orc, d h rgig r-
(EM) phr who wi grow 6.-7 pr c pc
i -. Th pr i h US i bgiig o pic p
ppor ro bor r h i howig w.
Erop i pgd b gor c prob pci
i ohr Erop d h UK b xpior orc r
i dc. Exporr i Gr d h UK r big
ro w crrci. Growh i h -cor rgiio
or Ecooic Cooprio d Dop (ECD) wi d
p rod . pr c i boh r.
Lw l l
io wi ri ow i h idriid cori or
xdd priod, rg pr cpci d high po-
ph dow wg d pric. Thr i i ri h
highr coodi pric wi hr hi ow-iio i-ro. D o iid iio prr d o cocr
bo h riic o h ci , dig cr
b wi procd r cio wih hir ir r
hi.
Howr, ir r wi b rid o rgr c i
h EM cori d xpor-dpd ECD cori.
Dpi ow iio d cio cr b, orig
bod id wi ri owh d o izb borrowig r-
qir d rogr cooic codiio.
Th ri brigh growh ooo do o h hword i rig or cooic iio. Th big
i i dgd, d i hig proc i coiig.
Ur-ow ir r d growig pbic cor db h
d o h popo o dj brd.
Th US cooic rcor h grd brodd. GDP
growh wi rch or h . pr c hi r d r
pr c x r. Th growh coribio ro i-
or bid-p d c i i owig, b hi i big
o o dc x b rogr doic dd.
Epo i oig owrd ipro, b h job-
r wi ow o j bow 9 pr c h d o
. Thi, cobid wih coid dci i cor i-
io (pric icr xcdig ood d rg), wi hp
prd h Fdr Rr o hod o o hiig i r
i Dcbr hi r.
J hl hd
Jp xpor r growig rpid, h o highr d-
d ro Chi d ohr Ai cori ho i h
r or h Jp coo. GDP growh wi rch -.
pr c i -. Dio prr wi pri
i h coo b wi b owh powr. Th go-
r i pcg h coribd o h
Global recover on rmer ground
USA GDP, quarterly change annualisedSource: Reuters EcoWin
2000 2002 2004 2006 2008
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
Percentq/q
annualised
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
gOOD pC OF XpiO i U COOmy
Ater a deep recession late in 2008 and early in 2009,
American GDP grew or three consecutive quarters, but this
expansion was entirely dependent on a turnaround in the
inventory cycle and scal stimulus measures.
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21Investment OutlOOk - may
Mcro r
cooic rrod b h rhr xcrbd gor-
c, which r howig dci o pr c o
GDP. Thr i o rgc bo ir r hi h B
o Jp c wi i d w prdic h h wi w i drig h x cop o r.
Th cooic iio i h ro zo h o b ipr-
i drig r . Th c crii i h PGS cori
(Porg, rd, , Grc, Spi) pci i Grc
i crig gr cri. Mwhi hr r ig h
h rcor wi coi, hogh ir pc. Vrio
dig idicor r oig pwrd, d h xpor cor
i big d b h w o h ro. Thi r GDP
growh wi b . pr c, d x r r pr c.
Th rio prob i Grc, ow growh d ow iio
r ro or h Erop Cr B o i r rri pr c i h prig o .
Th Briih coo i o i w p. GDP wi grow b . pr
c hi r d pr c i . Th w gor
c r big chg. Th cor i pgd b dpr
ibc prob h ohr dig cooi; h bdg-
dci xcd pr c o GDP. U h gor
i b o prodc crdib p or rorig c ordr, h
UK orig db rig ri big dowgrdd. Th B
o Egd wi o ri i r i Dcbr .
dc wll w lw h OCD
A GDP growh i h Nordic cori wi d p r-
gig h . pr c i -, bi owr h h
ECD cori who. Swdih d Fiih GDP wi i-
cr h , i boh c wih xpor ipor
gi. Norw h i orc o growh wi b pri
copio, rg h o izb ico icr. Th
Dih rcor i qi rgi, og ohr hig d o
rir dci i ho pric d corcio.
m h l w d
Thr r good propc h Chi h gi o h word
coo wi pror w. Th o ighig o co-
oic poic d crrc pprciio, growh wi dcr
ro . pr c hi r o 9 pr c i , pc br
copib wih owr iio. di o h good growh
poi, hogh pbic bdg dci h rchd bo
pr c o GDP d iio h cibd bo pr
c. Frhr r hi p c ighig r o
rgh h bdg d pric prr wi brig
di GDP growh dow ro 8. pr c hi r o 7. pr
c x r.
l dl L c
Wih growh r o 4.- pr c i -, Li
Aric i i cod pc r Ai. Brzi, Mxico d Chir h -growig rg cooi. A 6-7 pr c, i-
io i h rgio i o h high id, b i ECD
cori boh bdg dci d pbic cor db r
. Nor do prcg o orig o d xr b-
c proid c or cocr.
h p ix oh, Er Erop h bg grd
cooic pr, b o cooi i h rgio r
coiig o dip d dci. Th rcor i b-
ig dri b copii xporr, whi copio d
i wi b wighd dow or ohr whi b riig
po, c ighig d ow cpci iiio.
Aog Er Erop cooi Pod i h hd
o h c d w h o EU cor wih poii GDP
growh r.
Tod h hr Bic cori r o chrcrid b
grd xpor-d rcor. Erir xr crr cco
dci h b rpcd b rp. Th rcio h
o hpd o dp iio dric i h Bic.
Sr cooic ibc rhr ppor h
h hr wi b o dio i h rgio.
China, Reserve Requirement RatioIndia, Key RateChina, Key Rate
Source: Reuters EcoWin
2002 2004 2006 2008 2010
Percent
2.5
5.0
7.5
10.0
12.5
15.0
17.5
Percent
2.5
5.0
7.5
10.0
12.5
15.0
17.5
WLL-JUiFiD igig mU
Since early 2010, Chinas central bank has raised the reserve
requirement or banks in three steps and India has hiked its
key interest rate twice. High growth in China and ination
worries in India are good reasons or these measures.
Source: Reuters EcoWin
2000 2002 2004 2006 2008
0
2
4
6
8
10
12
14
Percenty/y
0
2
4
6
8
10
12
14
igiFiC gOW CCLiO i Ci
At the bottom o its economic slowdown in the rst quarter
o 2009, China recorded a GDP growth rate o more than 6
per cent. Since then the growth rate has climbed to nearly
12 per cent. In the short term, it may accelerate even urther.
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22 Investment OutlOOk - m ay
cl:
qu
Strategically, the undamental driving orces
are in place
The extraordinary loan package will create
new opportunities or European equities
Emerging markets again in ocus
Th r hoc h doid Jr d r Fbrr
Chi cooic ighig r, h c prob
o Grc d Prid b propo o ricr b-
ig r cd hr pric o hrp, b r h h
oc r r rd drig h prig. Fig hi r
w cr prpodrc o poii rpri i boh cro
iic d h ow o rig rpor. Eqii o b-
d ro coid high xpior c iro,
pci h xcpio ow ir r priig i
h ECD cori.
Th rgh o hi prig oc r r cod o r-
ch r rog pwig. B hi w ir
copib wih h riio ro h rir ph o rog
r hop rog dri b xpcio o hi ro
o d dciig pro o riig pro o h growh
ph h h oc r h b i ic r , wih
corio o riig corpor pro rig powr
gi. Er i hi growh ph, i i o orhr io o , phoo h o chrcrid
h r qrr o d rhr d h oc r.
So w io h cod qrr, howr, oc r
gi cord hdwid. Th wr i h or o
rpid cig Gr c crii, cod o cdic o-
cic h h prd o ir rfc i Wr Erop
rig i hrp hr pric dci or iri i pricr
d cii rd i d b h US Scrii d Exchg
Coiio gi God Sch, dr cig h
hr pric o b d ohr ci iiio.
Ad hogh h ocic h i o go or h o,
Grc h rcid o oig EUR biio ro h
ro zo d h MF, d h EU/MF pprod r-
gc pcg o EUR 7 biio, hr i ro o h
owh cio opiiic id owrd qii. Th
prob o oig gor db ri d co-oic xpcio ppr bi oo chr.
Drig h prig, oc r pr bc poid b
ro poii cro rpri d h cr prpodr-
c o xpcd good rig i cop rpor, boh
i h ECD cori d h EM phr. A coqc,
ccic xpcio i h oc r chgd hp ro
U o V. A h i, h ood bc icrig
chr. For xp, US opii bo word cooic
prorc i Apri w h high ic h boo r
-6, d h prcg o pii w h ow
i r. Mwhi Aric d h i i
qii c hir iqid o h ow ic h r
o h ii, d oc r hodig b US ho-
hod ro dric.
Gi bcgrod doid b growig gor db
d crr prdoic o xpcd good crogr which bood r xpcio bo h
Short-term risks long-term opportunities
Source: Reuters EcoWin
Jan
2009
Apr Jul Oct Jan
2010
Apr
200
225
250
275
300
325
350
Index
200
225
250
275
300
325
350
bULL mk bUmpy iD
From their turnaround in March 2009 until early May 2010,
world stock markets rose about 60 per cent. The upward
ride was not a straight line but was instead rather bumpy,
the usual pattern during a bull market.
8/9/2019 SEB report: Risky investments still a good long-term bet
23/36
23
cooic pwig w boh opiiic oc r
pr d hohod, b idicio i wi rqir r
poii rpri h icro d/or cro o riggr
rhr hr pric ri.
Th r qrr rpor o i or, o
cop r i o p proi ro or o
i. Mwhi h oc r o h dicod
r cooic rcor h o cooic orc
r prdicig. Thi i dowid ri or h oc r,
oghr wih h ri h ECD cro d wi r r
or ixd d h probb pr gi rpri (
pg 7-9). A h i, hi ri i iid b ro-
b io i o oc r pric/rig rio
i h US r j bo d i Swd j bo , or
xp w pro orc or d o oid - pr c.
W cc w wll lw c
Drig h prig, oc xchg i Swd d h US
prord or rog h ho o h ro zo. Thi
w d o cr poii Swdih d Aric cooic
w, whi h gor db oi i h ro cr-
rc io w dr cri. EM oc r who
ggd bhid h word idx, i d o ggig Chi
hr pric i h w o cooic poic ighig.
Ccic cor ch idri d coodi copi
prord or rog h di o i hh cr.
h ECD cooi oo r cr ph r hir
r rog pr ph, cor h r o o ccic wi
bco or rci b o h pr di o,
ic growh i oo o b dc.
m h l
Th rgig r phr ri ppig, pci
Er Erop icdig Ri which i bgiig i co-
oic pwig hi r d Chi, whr h oc r
h qi big d o cooic ighig -
r. Th US i owh or rci h Erop, wih
xporr i h ro zo cor cori i Gr
poii xcpio d o h w ro. Thi i pci
r i h xporr h hir o ipor r i
h EM phr.
Ahogh i h i h oc r prorcwi b i ixd hi r, or i h hi
do o ig h bgiig o br r, b i id
w ph o coid b r.
Srgic i rogh wo-r prpci oc r-
codiio good i h ECD cori h o
iproig cooic codiio d pro, ow iio d
r od ir r hi. EM oc r wi b
ro high cooic growh d rg pro icr, which
wi o rgr ir r hi i h cori. A pr
o hir ccio, ior who r bd i ECD
cor hod o br i id h chc o crrc r
gi o hir i i EM qii.
Investment OutlOOk - may
A c: Eqii
Relative performance MSCI Emerging Markets vs MSCI AC WorldMoving average 20 days
Source: Reuters EcoWin
May
2009
Jul Sep Nov Jan
2010
Mar May-2.5
0.0
2.5
5.0
7.5
10.0
12.5
Percent
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
m QUii bi b WOLD iDX
Although the Chinese stock market took quite a beating due
to the governments economic tightening measures, equities
in the EM sphere as a whole perormed relatively well dur-
ing January-April 2010 thanks to good stock market gains in
Latin America and Eastern Europe.
Relative performance EuroSTOXX50 vs MSCI AC WorldMoving average 20 days
Source: Reuters EcoWin
May
2009
Jul Sep Nov Jan
2010
Mar May-25
-20
-15
-10
-5
0
5
10
Percent
-25
-20
-15
-10
-5
0
5
10
WiL UO ZO LggD igiFiCLy
As the Greek scal crisis escalated, euro zone stock markets
perormed signicantly worse than the World Index, but
German exporters did well.
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24 Investment OutlOOk - m ay
cl:
Fxd c
Central banks are ollowing divergent interest
rate paths
...which aect the trend o government bond
yields
...High Yield still the best ixed income choice
Ar ig ri ppi r i , US orig bod
id ro gi wh ior od gor crii
o b ri ch qii d corpor bod. B
i h cor cori o Erop, gor bod id co-
id dowwrd. ro w h h Gr c crii
cd ior o oid orig bod i h priphr o
h crrc io d id b Gr gor
bod. Th id prd bw -r Gr d Gr
gor bod widd dric h d o Apri
dpi h EUR biio o pcg or Grc. Wh h
EU/MF pcg oig EUR 7 biio w dird r,
howr, h gp hr igic.
Looig hd, how gor bod id o i ri-
o cori wi priri b drid b h cio o
cr b, h dgr o cooic rgh, iio ri
d wh hpp wih pbic cor c, pci i
Erop.
Bc o r ow iio prr d igrig worri
bo h hh o h ci , h o ii
ECD cr b r big ob cio bo dpo-ig hir ir r wpo. or , h US
Fdr Rr wi r i r hiig cc i Dcbr
, d h Fd wi o bgi ig o bod i x
r h ri. Th B o Egd p hd o
rg ci ibc b i whi corod wih
rhr high iio. i rob o h Briih
r hi wi bgi bo h i ho o h Fd.
Cb c d u d luh c
Th iro h h Erop Cr B c i
doid b growig pbic cor db oi, rhr
ggih cooic pr d bow-rg iio. Th rECB r r hi wi h o occr i h prig o .
Th B o Jp (BoJ) wi b h o h jor cr
b o i o. Bc o odr cooic
growh d coid dio, h BoJ wi p i ir
r wpo d i h cod h o .
o idriid cori pci coodi- d
xpor-dpd cori h how highr growh d
rgr iio ri h h ECD rg ir r
wi rh oo b rid. Thi h rd hppd
i Ari d Norw, or xp, d oo h B o
Cd d Swd Rib wi oow i.
Interest rates and ields a complicated mix
US UK Japan GermanySource: Reuters EcoWin
2000 2002 2004 2006 2008 2010
-1
0
1
2
3
4
5
6
7
Percent
-1
0
1
2
3
4
5
6
7
COD-LOW ky FO Om im O COm
The deep nancial and economic crisis per-
suaded the worlds most inuential central
banks to cut their key interest rates to record-
low levels. There is no rush to begin hiking
these rates, since ination risks are minimal,
the nancial system has not been restored tohealth and government debts are cause or
concern.
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25Investment OutlOOk - may
A c: Fixd ico
D o rogr cooic di, grr iio d-
gr, igic br ci bc h i h ECD
d ri o bbb, cr b pci i Ai
b o i Li Aric h bg poic ighig, rd h wi doi -. Er Erop, how-
r, r Ri ir r c r i h crd. Pod
cr b wi b h o o i h rgio h wi bgi
rchig p i ir r r hi r.
Th Gr rgd h odd hi wir d prig -
drcord h ociio bw pbic cor c d
orig bod id. Th dric growig prd b-
w Gr d Gr gor bod id hi prig
( chr bow) rcd h c prob o Grc.
B dr or or circc, hr i -
ociio bw h ig i cor pbic
d pri, ddig p o h crr cco bc d
orig bod id. For xp, -r gor bod
id i Jp r . pr c d h corrpodig id
i h US r . pr c, hogh boh cori h
gor bdg dci o bo pr c o GDP. Thxpio i bi rgr pri ig i Jp,
which h h cor h crr cco rp o
bo pr c o GDP oppod o h US crr cco
dci o bo pr c o GDP.
r cocio i h gor bod id i h US d
h cor cori o Erop wi ri ow drig ch o
, h o iigic iio prr d h c
h cr b wi o bgi o hh hir ir
r wpo bor h d o h ri. Whi
wiig pri progr i h g o c d-
ci, h gor bod id o h priphr o h ro
zo wi, b idicio, ri high. Mwhi rog
cooic codiio d ir r hi wi corib
o riig gor bod id i cori i Swd d
Norw. Pr or h ro, highr bod id r
o ii i rg porio o h EM phr.
Yid i h corpor bod r which ro r i
ior ri ppi wd r rd hir dci,
phig p h pric o h bod. Er i M, howr,
corpor bod rd porr pric bc -
ci worri od. Th ooo i rh good i ri-
o rpc. Ahogh h b priod or corpor bod
w drig 9, hi c wi b ro coid
cooic pr d ow iio. Hioric pig, cor-
por bod h o proidd br rr h
ohr bod drig h r ph o ir r hi, which
ipi h hi c h chc o iiig i -
rci i r w.
D o rir ogh co-cig og wih ow-rrig
op i growh, copi rod h word h icrd
hir pro or h orcd. Aog wih p h h
iprod hir db rcr xdig h rii o
bod odig, iig w hr d bidig p r-
gc iqidi hi h icrd qi/ rio d
h h bii o h corpor cor o cop wih cooic
ri. Br corpor ci hh i rcd, og
ohr hig, i rpid dci i brpci og cop-
i i h High Yid g d rpid icr i corpo-
r crdi rig pgrd.
Rr o corpor bod r priri drid b h
priig id gp gi gor bod d how h
id o h r r oig. Gi igic highr r-
r o High Yid (HY) bod h o Grd (G)
bod d h propc o coid ow gor bod
id i h US d h cor cori o Erop, HY i-
i ppr rci. G bod r ppig,
howr. Gor crii ri rci.
Greece GermanySource: Reuters EcoWin
2005 2006 2007 2008 2009
2
4
6
8
10
12
Percent
2
4
6
8
10
12
vyig i i gk gOvm bOD
The nancial and economic crisis in Greece orced the eurozone and the IMF to provide the country with a large emer-
gency loan. The severity o the crisis was reected in the
record-high yield spread between Greek and German 10-
year government bonds. Ater the subsequent EU/IMF pack-
age was approved, this yield spread narrowed substantially.
AAA BBB CCC and above B BB
Source: Reuters EcoWin
Jan
2009
Apr Jul Oct Jan
2010
Apr0
250
500
750
1000
1250
1500
1750
Basis
points
0
250
500
750
1000
1250
1500
1750
COpO bOD Civ
Early in May, there was a temporary setback in the corpo-
rate bond market due to the ongoing scal drama. In the
US, or example, the yield spread between industrial and
government bonds widened at that time. Since then, how-
ever, conditions have again improved or corporate bonds.
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26 Investment OutlOOk - m ay
cl:
d ud
somewhat better than a normal year
Quality more important
Short Biased has had a tough time this year
Hdg d r coiig o pror w. So r hi r,
brod hdg d idic h dird rr o rod
pr c r-o-r. No rhig h b h dor,
h rbc i Jr d r Fbrr phic
howd. i o hrd oihig h hdg d
g ocd rod bi i h hor r wh xpcd
occr i h r. A i o rpriig ,
howr, ordir r r o hrdr hi h hdg
d, who i xibii o b h o qicrdj hir d hrb dg o h w
r iio. ddiio, cri rgi pror p-
ci w i i o rb r. Mrch r which
wr h b drig h p ix oh or o howd h
hdg d coci wr cc i h r ci
h prid i h prig o .
E Dri i h rg h h prord h b o r
hi r, h o ri o ro. M corpor rg-
r d cqiiio h pc, ro which gr
o h d h b b o gr . Mrch
o, M & A rcio oig or h USD biio
wr ocd idicio h h r i gi
bgiig o rw. E Dri gr h o
bd ro rio h ch hh cr, which h
h ccdd i xpoiig. Th gr h o b
cc i crdi i. E Dri i rg w
worh co oo, d o worh iig i drig h x
cop o r. gi cor, howr, i h iqidi
i hi pr o h hdg d r i o o h b.
For h Gob Mcro rg, o d h b bi
or chgig, hogh hr h b dir
h d r wih good poi rr. So r hi
r, xpcd chg i h id cr or gorbod, pci o h hor d o h cr, h b
co i r o o rr. Hr h r-p o h Gr
c crii h pd ipor ro. Thr h o
b rr rd h h dd rd rod i
orig xchg diirio, ohig h i difc or orig xchg dr o corrc or i h hor
r. Cop Gob Mcro gr hod rh
h good poi o dir good ri-djd rr dr-
ig h ridr o hi r.
Th prob o rr d how h dr c cri
p o hdg d i worh xiig bor coig
o ohr rgi. Rr ipc o o Gob Mcro
g, b o prhp o grr dgr CTA
(Coodi Trdig Adior) d. Boh io
dir c. B o dirc i h CTA
copr od d oic rdig, whi Gob Mcroi bd o d rdig. Th chr bow how
xp ro 9 h xpi h difci h g-
r c cor i r whr rd rr.
Thi r CTA h good poi o dir r r
difc 9, b hr r jor qi dirc, o i i
ipor o i i h righ hdg d. CTA c grdir good rr or i, b pci ipor wi
b h corri rib h hi rg h i robd
Continued good prospects or hedge unds
EUR/USD Brent oil
Source: Reuters EcoWin
Jan
2009
Apr Jul Oct Jan
2010
Apr
EUR/USD
1.25
1.30
1.35
1.40
1.45
1.50
1.55
USD/Barrel
30
40
50
60
70
80
90
D vL D O CpU
Although the long-term trend was upward, 2009 was lled
with short trend reversals. This made the CTA and Macro
strategies more difcult.
8/9/2019 SEB report: Risky investments still a good long-term bet
27/36
27
i. xp i 8, wh r ci i-
hd diro r, whi CTA proidd poii
rr. W h rib. or , CTA
b b o dir good rr hi r w, wh rr xpcd o b chrcrid b biiio. Th rd
oowr cic b ib drig , b dop
ch w c rob po r chg h
picr.
Qi dirc r ipor wh i co o hdg
d, h chr bow how.
Mrch CTA, or Mgd Fr, howd rr rgig
ro -6 pr c wor o + pr c b. Mo hdg
d proidd rr o bw - pr c d bo +8
pr c. Ergig Mr d od pci rg di-
ri, wih rg ro -6 pr c o +8 pr c. i
h r ipor o choo h righ hdg d, d o
ipor o o oid h wor or, which c b r
co.
prio i o oo, w h dr-
cord h d or r horogh o hdg d
d hdg d copi, d ior o d
o g hp wih hi, ic i i xi . W wor
oghr wih K A Mg, which SEB cqird i
7. K A Mg g hdg d o dd h oid ic cpci i hdg d, which w
.
Eqi Log/Shor (L/S) h word w o r hi r,
rrig bo h hdg d idic i gr.
Mrch w r good oh or hi rg wh oc
r wr prorig rog. Eqi L/S i h ir
ow xpor, d gr h cho o b cio
poiiod ic hr r crii i h r.
Eqi L/S hod o b b o proid good rr drig
, wih good riic o h dowid i c worri
hod c.
Th Eqi Mr Nr rg h hd igh difc
i o r drig , wih gi rr h idx
ic h r o h r. Howr, h r ph-g-
rig d h dd good rib o ior or
poroio, o w pprci hir b.
Aohr rg h h r io dri i Eqi Shor
Bid, which i or or w hor i h r. Wh
oc r , h hdg d gr , b
wh oc r go p h did i Mrch, or x-
p h d big. Thir Mrch bc o or
h 6 pr c co hi cr.
gd l hd ud h
Gi h priig r iio, or i h
hdg d h c gr rr o h bi o -
io wihi or bw dir c hi r h
good poi o dir good r. W prdic h
wi b owh br r or hdg d h or
r. W r chooig o p o o or hdg d i-
wih Eqi L/S, Gob Mcro, CTA d Mirg
gr. W r iig i E Dri d i
Mirg, b E Dri i ch rci rg
h w r w dd i o or poroio wihi o or woqrr. W xpc hdg d o corib o i bii.
Investment OutlOOk - may
A c: Hdg d
Distressed Securities, 2008-01-01 = 100Macro, 2008-01-01 = 100
Equity Market Neutral, 2008-01-01 = 100Market Directional, 2008-01-01 = 100
Source: Reuters EcoWin
Dec
2007 2008
Aug Dec
2009
Apr Aug Dec
2010
Apr
60
70
80
90
100
110
120
Index
60
70
80
90
100
110
120
Dvg: DiCiOL gi
Directional strategies have been able to benet rom rising
markets, while neutral strategies have had more difculty in
holding their own.
FUND APRIL 2010 MARCH 2010 yTD 2009 2008
FX gll d Fud idx .% .% .% .% -.%
FX qu d idx .% .% .% .% -.%
FX qu m ul idx -.% -.% .% -.% -.%
FX D idx .% .% .% .% -.%
FX mc idx -.% .% -.% -.% .%
FX c Dfd idx .% .% .% -.% .%
FX l vlu idx
.% .% .% .% -.%
Hedge unds will deliver
good earnings this year,
except or Short Biased, but
this strategy may benet
rom market crises. Among
hedge und indices, the CS/
Tremont index is up 3.%,
the HFRI is up 3.% and
Eureka Hedge is up 3.33%
to the end o April. Hedge
unds are thus on track, but
their path may be curvy
when crises arise.Sorc: Hdgd Rrch
8/9/2019 SEB report: Risky investments still a good long-term bet
28/36
28 Investment OutlOOk - m ay
cl:
l
Real estate is recovering, but scal dangers a
threat
Interest rates are alling, prices are rising
Bubble tendencies in China
R c h od rhr i h righ
dircio drig h p w oh b i o ir o
o h wood. h Investment Outlook(Mrch ),
w wro h i w i o r cio iig i r
. W o did o i o o or poroio. Thi i-
r h ci ior h bg o iw r
wih dir h drig h dric ci crii.
Th big i cioig ch br gi, whichi rcig r ior. Fdig opporii r
iproig, d o ri i owr boh or propr copi
d ho who ci i i hi c,
b rr or h ci wod dr ipc
hi c.
R h o cibd i r ic
h bgiig o . Th coqc h b ir
word or propr copi, which o ogr h o worr
bo hir ri d c id cocr o h
o grig rr. R i r (RET)
d hr o r copi h o prord w.Propr rcio r o howig rgh b ioig
or cori, which cor h rgh o h pr.
u ll h l h U
h Uid S, o w ig-i ho cibd
7 pr c oh-o-oh i Mrch, h rg ch i-
cr i 47 r. Th i ro or h rg i w
probb h x crdi o p o USD 8, or r-i b-
r, proidd h igd corc b Apri d h who
rcio co b J . Th chg ro r wir
whr i Fbrr o prig whr i Mrch o h
bd drig h oh. E ig h pci
ro io cco, h Aric ig-i ho r
o b oig owrd biiio, hogh r
ow o cii.
Rcig o h gr, corcio-rd hr
oo o i US oc xchg. W hod o rd oo ch
io h gr h, b h c h h grrpd orc i orc o hop h h rcor
i rogr h o xpc. Grd h 9 pr
c o h US ig-i ho r coi o xiig
ho, b i hi b-r oo, Mrch iic howd
cr icr h r i or oh.
Th br o r rcio i coiig o
icr ro ow , corig h or poii r
dcp which bg o rg drig h cod
h o 9.
Aid ro icrig rcio o, pric r o
riig. Th ir h ior cod r i h w o
h crii h prio b r high (d pric h ow),
which w r. For h p qrr or o, howr, rio
pr o h r h bg pricig r i w,
highr w. Thi h rd i owr ir ico or i-
or. prcic, hi pric h go p, d h
r xpcd o coi riig.
Continued positive signals, but there aredangers
Exist ing home sales New home salesSource: Reuters EcoWin
1990 1995 2000 2005
Millio
ns
2.5
3.5
4.5
5.5
6.5
7.5
Millio
ns
0.3
0.5
0.7
0.9
1.1
1.3
U igL-FmiLy Om L Op FLLig
The market or new and existing single-amily homes in the
US is beginning to recuperate, as sales gures are showing.
Two main actors have contributed to this: the economic
recovery and the temporary tax credit.
8/9/2019 SEB report: Risky investments still a good long-term bet
29/36
29
g c h
B o rhig i poii i h r r. Thr
r o dgr. o h i h ri h cori wi
d o hir db. Grc i h cor wih h big-
g prob h o. h c worri wr oprd, i wod o b gi, probb icig h
pp o crdi i b or h bod r. Rwd co-
oic bc wod o b gi or r . Th
ppi o h xiig iio ri, pci i pr
o Ai. Ao o h gi id, hr i cri bo
how big h cooic coqc wi b wh jor c-
r b bgi ighig hir or poici, ohig
h h cr b i ch cori Ari, Norw
d di h rd bg o do. cori, ir-
r hi wi prb o bgi i i or
r , b i i ipor o p pci wch
o ir r rd.
ddiio, hr r cr pric-bbb dci i cri
pr o h r r i Chi. Th Chi gor-
h bg o igh i cooic poici, or xp
b booig h rr rqir or b d ig
rio ohr p o ri r ir r. Th hori-
i r o coig h g h Chi -owd
copi which r o r copi hod o
bid w propri. ri o b how ch c
h r wi h, b i h pric rd i porio o
h Chi r r coi i crr pc,
h r crrid o o r wi o b ogh. Sigpor
h irodcd p d, xp o ohr hod
o r o p h pric rd i h r r drcoro.
mxd w
M c h grd rcord, d hi i ow
o r i porio o r c. Th proc-
h b dri b ior who w rr o hir
cpi. To growig x, h h rgrdd r
i good w o gr ow-ri rr. W-
gd propri i good ocio h b h oc o
hi r ior-d rcor ph, wih h r h h
pric d o-o- rio or h propri r iir
o wh w prio bc ccod o. For w--
gd propri, h iio c h b rg coidrd
orid.
Th iio i dir or propri h r o w--
gd, d i ordr or hi r o ori, h x ph
o h pr wi d o bgi. Th word coo
ipro rhr, d wh w w o bo i h
cori g po dr coro. Th r
ig o hi h o co, b h proc b gh
d copx.
h hor r, hr r ri wh cr b wihdrw
hir i r (ci hir xi poic), b hdowid or h r r i i o b iid or
ior wih i horizo o r or ogr. h x
w r, w xpc rr h r rogh q o or-
og-r rr: ri-r ir p - pr c.
W h r i h rpr w pr c
o o o or g d. W xpc o b b
o icr hi prcg i b i h word coo-
ic rcor coi, b coidrig c crii d
bbb dci i Chi, w r hrrig ow.
A c: R
Investment OutlOOk - may
0
50
100
150
200
250
300
350
North America Europe Asia
USDB
illion
2005 2006 2007 2008 2009 2010*
vOLUm i COvig WOLDWiD...
Measured in volume terms, commercial real estate invest-
ments are rising, though rom a low level. Financial investors
have changed their view o real estate and are now daringto enter the market.
0
10
20
30
40
50
60
70
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
Investments(EUR
billion
Europe UK France Germany
...D UOp mk piCkig Up
Major European markets are showing largely the same
trend or commercial real estate investments. Ongoing
worries about Greece may, however, aect the credit supply
ahead.
Sorc: Jo Lg LS
Sorc: PMA Propr Mr Ai
8/9/2019 SEB report: Risky investments still a good long-term bet
30/36
30 Investment OutlOOk - m ay
cl:
p qu
The private equity (PE) market is unctioning
again
Increasing supply and attractive prices are
providing good business opportunities
Despite uncertainty about regulations and
unding, we have a positive view o PE, given
good quality selection
Th word ci r r coiig o ori. Th
xic o h cooic rcor i o qiob, -
hogh i rgh growh dic i op o dicio.
Thi i good w or h pri qi (PE) idr d ircd, og ohr hig, i good idx rd or id
PE copi.
Th or picr i h drig bi i o
brighr, b h i or copx. Pr o h PE
idr r i grppig wih jor prob. M o h
d/copi h d ggri, high rgd i-
i h cooic xpio r i coroig
difci. Mwhi bi opporii r
good or ho ior who poroio copi r i
good hp d who h o o i.
L l h qu
Th drig hic i pcic o PE i. A
o pop ow, PE copi (or d) hir c
i or priod o r. or who pricip
ro h r dr o dir o h d b
copi. A d h rd drig h p r 8-
9 prhp hd i o o o or w cop
i bor h crii hi. Thi h i-
or i h rg riig obigio o PE d.
Drig h 9 crii, rg porio o h PE r roz
cop. Ao o w d wr rd, d i h
codr r (rdig i xiig hodig i d obig-io o PE d), wordwid o ro USD biio
i 8 o USD 8 biio. c hrd rpri o h h
prir r did o. Th ggih o h codr
r w o -id, b i w rg bc -
r d br ood r pr rgrdig rob pric.Mwhi o o ior wr dr prr o ,
ic h d h rd i h r j bor h crh,
d h wr o id, wr o ci i big
copi. Thi h h wr o cocig or
cpi ro hir ior.
vu c hd h h ul
Tod h r i rpid hwig. Th dig iio h
brighd coidrb. Grd h rgr prcg o
qi i ow rqird, b hr i i o o bi
or PE copi. Th or poii gr cooic
picr i ohr coribig cor bhid rpioo cqiiio b PE copi d d. A r, or
d r drwig cpi ro hir ior, orcig -
ci w ior o gi p prio id o
wh h r o cpb o ig w dd or
cpi. Thi cr god oppori or ho who h
cpi o i, ig good or idiig qi
i. h c i i o dg o b w-
cocd i h PE idr, ic o o h hodig do
o rch h brod r.
Favourable situation or good private equit
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010E 2 011E
CODy mk kig OFF
(biio)
The secondary market or private equity roze during the
2009 crisis. An unexpectedly rapid recovery is leading to
new record volume, creating good business opportunities.
8/9/2019 SEB report: Risky investments still a good long-term bet
31/36
31
W poid o i h Investment Outlook(Mrch )
h good PE copi o h hir b priod r
rcio. Th i o r hi i rod, d prhp
o grr x h coidrig h dph o hdowr. Lid copi r ow crrig o jor co-
cig o brod ro, which wi d o good oprio
rg oc dd o, d highr rgi wi d
o rg pro icr. Thi o ppi o o h PE
copi poroio r.
Widprd qio r big rid bo cop db,
d hi w o db worri o obrr. A rcord
br o corpor bod d crdi wi d drig
h x w r. M PE copi h rpodd o
hi wih o xio, corpor rrcrig d ohr
r o rdc hir iii. or jdg, h PEidr i i cpb o hdig h iio.
Aohr or cod cocr rgio. Dicio r
drw o boh id o h Aic bo ighig h
r or h ci cor, icdig h PE idr. No
propo wi b ipd, b h US gor
iio o prohibi b ro owig PE i
r w bco ri. Sic b ow r pr c
o Aric PE i, hi wod cr pp prr
h wod hr pric i h codr r, b i wod
o cr good big opporii or ho wih cpi
o i.
A w wro i h Investment Outlook, i i ipor o
diigih bw good d bd PE. W r i ocig o
i h cri criri h, i or jdg,
rc good PE i h priig r iio:
Operational resources to pursue the reform process in
rg copi
Target companies that have captured market share during
h crii
Few problem companies in their portfolio
"Dry powder for new investments
Log-r riohip wih oc dr wr prio
ohr ipor cor, b hi ow ppr ipor
ic h crdi r h orid.
A or id PE, w c h i pric prorc h
coi b good. Th LPE idx h coid i
rcor b h og w o go bor pprochig i od
p. Mwhi h copi r coiig o rd
dico i rio o hir (NAV). Th
rg dico i rod pr c. Thi i bi
r dico h h ow poi r go, b i o
pr wih h ow ro h prio rcio. Th
hioric rg i dico o h pr c.
hod o b od hr h h dico ccordig o
h copi r ccd r cori. Aog
ohr hig, hr r o dj or iiqidi.
L dcu v huld h
ro or h coid rg dico b h
ior ir . A rcio h ow
rd, w h copi d o b od pric
bo h d (cori) NAV. hi rd pri,
NAV hod b ccordd grr codc, which hod
ji r dico. Add o hi h NAV hod b b
o icr i od or poii cooic iro.
r cocio i h h hr i roo or izb pric i-
cr o id PE, hogh wih gr oii dpdig o
h ow o w bo poib rgio d ohr r.
W o or coid r good bi opporii
i h codr r. A iod bo, h pp i
i o grow PE copi r hir i d
h rq or cpi ro ior who i o c
r ci prd. W r coiig or or o idi
rci i ri i hi g whi r-
iig d, i w c, rgig or id pri qi
hodig.
Investment OutlOOk - may
A c: Pri qi
LPX50 TR Index, 2003-01-01 = 100
MSCI World Gross Index, 2003-01-01 = 100
Source: Reuters EcoWin
2003 2004 2005 2006 2007 2008 2009
50
75
100
125
150
175
200
225
250
275
Index
50
75
100
125
150
175
200
225
250
275
p piC UpU FO p COmpi
Listed PE company indices have climbed
sharply since bottoming out last autumn, but
during the crash PE companies ell more than
the stock market as a whole. These companies
have a long way to go beore reaching their
previous peaks.
8/9/2019 SEB report: Risky investments still a good long-term bet
32/36
32 Investment OutlOOk - m ay
Price setback early in then spring rally
Strong association between change in growthrate and commodity prices
Market orces pulling in dierent directions
Thi r bg wih izb coodi pric bc d
o cocr rd o Gr gor c, cooic
ighig r i Chi d Prid b propo-
o ricr r or b. B drig h prig, coodi-
i gi bc or xpi, h o rghig
word coo, pp rricio i o coodi
g d highr ri ppi og ci ior.
Th pric r w d b idri , pci ic,ii d coppr.
h hor r, boh ECD d EM pr growh wi c-
cr. i, hi i i o coid ri i
coodi pric, ic hior how h h co-ric
bw chg i h growh r (cod drii) d
coodi pric i rog. Drig h p dcd, hi cor
h xpid bo 4 pr c o coodi pric, whi h
growh (r drii) h b ch ipor,
wih o pr c xpor .
A i o r cooic growh, h o ccic co-
odii rg d idri h ri h o
i pric, d h h o h o drig cooicp. Sic h r o h ii, h drd d-
iio or h coodii h b r 4 pr c,
coprd o o bo pr c or prcio d
gricr coodii. So i w o rpriig h h
prig pric r w d b br o idri d
h oi o bc coidrb or xpi.
Dd or coodii b Chi h gi o h word
coo i crr o coiig o grow. Rcig
hi, h cor crd oi ipor r co o rcord-izd
d i prch o coppr r growig dobd-digi
r. h US, h hi o ior-bidig wi coi orohr whi, big h coodii r, d wh
hi d h Erop ior cc wi o ic i or
whi. Coodii o h ghir ior cc h
h gr cc, o coodi prch or ocpiig
pri or ogr.
Ch h u
r cr b or h coodii r i o howig
ri. High Chi growh d h ccopig orhig
ri h cd horii i Chi o h rio ir-
rcr projc d bgi ighig cooic poici.
Thr i o cocr h growh i h ECD cori wi
dcr h poii c o h ior rrod
d i r d. ddiio, h c prob
h r ow rig p ri ig h br ci o
growh d prdig ci ior o ri
. Fi, hr r r h or xpi oi d
pro wi dri prchig powr, poi h ood o
bi d hohod d d o iio worri i h
xd ico r d og cr b.
Th ri do o oo rg, howr. No owig h
Chi coo o rh io orhig i poii, d
rio o h ribi () o p i Chi
cooig-o poic wod i i o b poii or co-odii, ic ipord coodii wod h bco
chpr or h Chi. Jdgig ro h pb g
Man orces afecting commodities
cl:
Cd
Source: Reuters EcoWin
Jan
2010
Feb Mar Apr May450
500
550
600
650
700
750
800
Index
450
500
550
600
650
700
750
800
iCkL Wiig iDUiL mL
This spring was characterised by a price rally or industrial
metals, with nickel as the winner, but in late April there was
a reversal as risk appetite in the markets dwindled.
8/9/2019 SEB report: Risky investments still a good long-term bet
33/36
33
ro dig idicor d h highr orc o GDPgrowh i rio ECD cori ( pg -), h odd
gi hig rbig dob-dip rcio r r
high, hogh dcrio i h xpio r i i h
crd r hi r. Gigic bdg dci d rw
gor db r idd orc o igic cocr,
b h hr c o ECD growh h h ci
ibc wi c wi i occr bi r.
h hor r, oi pric r w cib i rpo
o coid high Chi dd, h pprochig high
o or driig i h US d h cor o o prodc-
io cpci i h Norh S d o ic wor.Drig h cod h o , pric r i o b i h
USD 7-8 pr brr rg. Fcor poiig i hi dircio
icd ior owdow i growh d coodi dd
i h ECD cori d high oi prodcio w r-
r cpci d rg oi ocpi. A xpcd rpid
icr i rq oi prodcio wod coi dowid
ri. Wihi h rg ix, r g pric r i o
bi coqc o hrp icrd pp i
h US.
pc ll dul l ud
Drig h prig, idri bd ro rog
dd ro d-r boh i h ECD cori d h
EM phr, w hriig oc d ri d
oprio prob i. L i Apri, howr, hr
w hrp corrcio. Dcrig growh i h ECD i
o ro o rg h idri pric wi o cib
drig h cod h o . Thr i pid chc or
coppr d dowid ri or ic.
Low r ir r, Chi dd, h di wd-
dig o, gob ci ri d cr b dd
wi prop p dd or god. ordr or h pric o cibrhr, howr, i wi probb b cr or h o
drgo rio (probb) d/or or h US dor o
w ( probb). Pi d pdi, which r
i prodcd i Soh Aric whr copiio or -
rg wi icr hi J d J d o h oob Word
Cp, which dirp prodcio coi o h
h b ooo. Mwhi dd or h ro
h ooi idr wi coi o icr.
Pric o gri-coodii rhr hi r d
r , d i i difc o b opiiic bo iz
(cor), wh d o b, dpi crr ow pric -. B i igh ogr i r, propc wi ipro
owh, d og ohr hig o icrd ho pro-
dcio ro iz d grr dd or w
i d coqc o gob cooic rcor.
Investment OutlOOk - may
A c: Coodii
Source: Reuters EcoWin
2000 2002 2004 2006 2008 2010
0
25
50
75
100
125
150
USD/Barrel
0
25
50
75
100
125
150
WLL-LUbiCD OiL mk
In April, oil prices rose to around USD 85 per barrel. Ater a
decline in May, they may rebound due to such actors as the
American driving season. In a longer perspective, prices will
probably be in the USD 70-80 range.
S&P/GSCI Agricultural TRS&P/GSCI Precious Metals TRS&P/GSCI I ndustrial Metals TR
S&P/GSCI Energy TR
Source: Reuters EcoWin
2000 2002 2004 2006 2008 2010
0
500
1000
1500
2000
2500
3000
3500
Index
0
500
1000
1500
2000
2500
3000
3500
gi-COmmODii Lggig biD
Many commodities have risen in price during
the past year, mainly thanks to the global
economic recovery, the need or inventory-
building and very high demand rom China.
While precious metals, energy and industrial
metals have perormed strongly, prices o agri-
cultural commodities have not kept pace. A biturther ahead, howeve
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