March 17, 2010
If there is anything most of us can agree upon regarding “normal” human behavior, it is that in the wake of a major event — positive or negative — we all should look back, analyze and ponder what is to be learned from a particular experience. While the financial crisis is certainly far from over, it has recently become commonplace for many pundits to put forward what we in the financial services industry need to do to avoid another such crisis and how we, as an industry and a nation, should protect investors in the event something like it should happen again.
Although tempting, I hesitate to contribute to the growing chorus of those who believe to have figured out what happened, why it happened and how we can prevent such misfortune from happening again. No matter how hard we try, there is no fool-proof, simple solution or answer. Notwithstanding the diversity of opinions and assortment of conclusions put forward, I do think there are a number of imperatives that have become very clear in the aftermath of the largest financial crisis in our lifetime.
The one I would like to touch on is that diversification of portfolios matters — and this doesn’t just mean asset classes like U.S. stocks and U.S. bonds. Investors I speak with tell me that they have a need to expand to both alternative and international investments to provide the balance and diversification they need today. Finding the right path, however, continues to be a mystery to many — and the need to demystify it has never been more prevalent than today.
When you look at the extraordinarily quick recovery in the emerging markets, the relative stability in Asia (especially China) and the relative strength of foreign currencies, it’s no wonder financial professionals and clients alike are looking overseas. Wealth accumulates as the global economy grows, and as information moves ever more quickly, investors are empowered to make better, well-educated choices for their investments.
Think about it this way: the U.S. economy, with an approximately $14 trillion GDP, is the largest in the world. China recently surpassed Germany and is estimated to be the third largest economy with a size of about $4 trillion GDP, just behind Japan. Many experts predict that with the size of its population, strong export-led industry and government’s healthy financial condition, China will surpass the U.S. in size within the next fifty years. And while China is only one example, it provides great reasoning as to why financial professionals and investors are now thinking differently. Talk about exciting stuff!
For many years, Pershing has provided financial professionals and institutions the ability to access over sixty markets around the globe. Pershing associates, through our execution, clearing and local market know-how, have provided a gateway to help our customers seize opportunities, diversify their clients’ portfolios and learn more about some of the most dynamic economies in the world today. As always, when you’re ready, Pershing has an array of solutions that demystify global investing, and we’re here to help.
Frank La Salla
Managing Director,
Pershing LLC