Nurturing Infrastructure Investments in Emerging Markets and Africa: Notes from Washington, Beijing and Riyadh
Africa Investor (Ai) & World Pensions Council (WPC) Inst. Investment Research, 2019
2 Pages Posted: 12 Mar 2020
Date Written: December 1, 2019
The investment choices of large asset owners such as pension funds, sovereign wealth funds and endowments, are, to a large extent ‘guided’ and pre-determined by the systematic use of old- fashioned indices or benchmarks designed by a small set of Anglo- American ‘index providers’ – most notably MSCI, formerly known as Morgan Stanley Capital International (MSCI).
These companies and the rather conformist investment consultants promoting their indexes tend to be unwittingly biased in favor of liquid assets in rich, developed countries e.g. the archetypal MSCI All Country World Index (ACWI) clearly encourages asset owners to allocate 55% percent (or more) of their overall (equity) assets to the United States and 8% to Japan – whereas these two ageing nations only represent 15% and 4% of the world economy respectively (in real terms i.e. based on purchasing-power-parity or PPP).
These unfair, deeply ingrained biases have de facto forced Northern Hemisphere asset owners to over-allocate capital to the US, Germany, Japan etc., thus sucking-up much needed financial resources from the rest of the world and hurting the long-term economic interests of Asia, Africa and Latin America.
The paper also explores the geo-economic and financial implications of the US-China rivalry from the perspective of long-term asset owners and the G20 Saudi Arabia Presidency in relation to the increasingly 'Asianized World Economy.'
The accelerating 'Sino-American Race' could benefit pivot-nations like Kenya, Egypt, Morocco, Ivory Coast, Senegal, Angola, Madagascar in Africa, and Estonia, Romania, Cyprus, Israel, Saudi Arabia, Vietnam, Cambodia, Malaysia in the Eurasia Pacific area – which will be courted like never before by Washington, Brussels and Beijing – thus eventually adding massive public funding and risk insurance resources to the rising private capital flows coming from sophisticated asset owners based in Canada, Scandinavia, Holland, Australia and Singapore (“Pension Superpowers”).
JEL Classification: F13, F15, F21, F22, F33, F34, F35, F42, F43, F52f, F55, F64, F65, F68, G11, G15, G17, G20, G7
Suggested Citation: Suggested Citation