Wealth Strategies
Deglobalisation, Volatility And Family Office Time Horizons – A Conversation With Dambisa Moyo
This news service talks to a prominent female economics writer and thought leader who was also made a member of the UK peerage late last year.
When you are an economist and commentator, and have penned books
with titles such as Winner Take All, Dead
Aid and How The West Was Lost, your views can
be counted upon to stir controversy.
Dambisa Moyo is author of the above titles, and more. Her
particular take on what drives investment returns and how to
think about market trends makes her a popular choice as a thought
leader and author. Given the financial dramas since before the
pandemic, this news service was interested to quiz Moyo about her
views.
And one take-home point of Moyo’s is learning how to stay
composed in unsettling times.
“Successful people are focused on structural issues,” she told
WealthBriefing, saying that a way for investors to
mitigate risk is to stay investing and not be distracted by
noise.
For all the problems that now exist – and often magnified via the
media – there’s much strength in modern economies, Moyo
continued. “Fundamentally it is quite difficult to unwind
hundreds of years of success, based on free and open markets, and
transparency.”
“We are in the mid-innings of a changing world…we are getting
close to a rates' equilibrium,” she said when asked about rate
hikes in the past two years. “We’re going into a period of lower
economic growth and higher inflation.”
Moyo, as shown in some of her recent books and
articles, thinks the process of “deglobalisation” – a term
referring to a fragmentation of trade and business interaction in
the past decade or more – hasn’t yet run its course.
“I think it has got further to go. Global trade (flow) peaked in
2007,” she said. “I believe we are going to move into that world
and it has fundamental implications for how and why family
offices, endowments and others deploy capital.”
Besides her publications, work with a family office and her
speaking assignments, Zambia-born Moyo also been a member of the
UK’s House of Lords since November last year – Baroness Moyo, of
Knightsbridge in the City of Westminster. Moyo is a co-principal
of Versaca Investments – a family office, focused on growth
investing globally. She also serves on corporate boards
including: 3M Corporation, Chevron, and Condé Nast.
WealthBriefing noted that Moyo challenges conventional
wisdom on trade, foreign aid, and other topics. Is she a
contrarian by choice?
“It is true I am willing to challenge established ideas and
conventions where I believe they might be failing – but my
underlying focus is always on the long term and seeking to look
beyond short-term volatility,” Moyo said. “I like to think of
myself as a realist, meaning I try to trade and invest based on
my view on what I believe will happen rather than what should
happen.”
Moyo’s response to what a world of rather higher interest rates
than existed post GFC is an example of that realism: “There’s
going to be less capital for `moon-shots’…there is going to be
more focus on capital discipline.”
While looking at general trends and themes, Moyo regularly tracks
measures of volatility such as the VIX index of US equity option
volatility, the gold price and West Texas Intermediate [oil
price]. She also keeps a close eye on the US Treasury 10-year
bond yield, the slope of the yield curve and yield spreads. On
equities, she tracks price/earnings multiples, among others.
“It is important to remember that fortunes are going to be made
in difficult times and in more peaceful times,” she said. “If you
look at family office portfolios, they don’t need to deviate from
allocations to their art, their real estate and their
equities.”
WealthBriefing asked Moyo whether her family office
position shaped a particular perspective – such as particular
time horizons.
“Yes, they are like endowments with much longer,
multi-generational time horizons. Family offices tend to be
skewed to allocations of one third real estate, one third art and
one third equities. They tend not to be invested in risk-free
assets like bonds. When dislocations like war or pandemics occur,
they tend to use those moments as buying opportunities,” she
said.
One area for contrarianism might be demography and challenging
the narrative that the world is groaning under pressure of a
rising number of people. For all the talk of rising populations,
it seems that below-replacement rate births, ageing, etc, might
in fact be serious forces and play to ideas about slower growth.
WealthBriefing asked Moyo how demography works in her
worldview?
“Traditionally the quantity and quality of population would
impact GDP growth, according to canonical models. This would mean
that a falling population would harm economic growth. However
moving into an era of AI could see growth coming increasingly
from productivity gains rather from from the labour force –
leading to an era of labourless growth,” she replied.
Talk of AI meant that this publication had to ask Moyo what she
thinks of all the talk about AI.
“The scope and scale of AI's impact extends beyond technology and
across the economy and wider society. The impact of AI from an
investment perspective is therefore broad. It will affect growth,
company profitability, the scope and role of government in
facing a jobless underclass and growing inequality,” she
said.
Finally, Moyo reflected on her blend of roles and how they fit
together.
“My work sits at the intersection of public policy, as a member
of the House of Lords, business and the private sector, as a
member of corporate boards as well as sitting on the board of a
not-for-profit endowment fund. While these roles are distinct,
together they help me form a more comprehensive view of economic
growth and investment,” Moyo added.