Wolfgang Seidel, a keynote speaker at the marcus evans Elite Summit 2010 and Private Wealth Management Summit Fall 2010, explores the upcoming investment opportunities.
Interview with: Dr Wolfgang Seidel, Finance Professor, ESCP Europe Business School
Nicosia, Cyprus, November 18, 2010 – FOR IMMEDIATE RELEASE
Equities and commodities offer very attractive investment opportunities, says Wolfgang Seidel, Finance Professor at ESCP Europe Business School. The performance drivers will be low valuations for equities and above-trend growth for commodities. A keynote speaker at the marcus evans Elite Summit 2010 in Montreux, Switzerland, and Private Wealth Management Summit Fall 2010 in Las Vegas, Nevada, Seidel shares his opinion on the asset classes and sectors that family offices can capitalise on, and why equities and commodities should appeal to long-term investors.
How should family office directors position themselves?
Wolfgang Seidel: With 2010 moving toward its end the macroeconomic situation is highly precarious. Concerns are both, deflation and inflation, the European sovereign debt situation and currency interventions potentially leading to wider capital controls and trade barriers. Short term, I would therefore recommend to stay liquid in order to be able to react fast. Being vigilant and having a plan B in the drawer should help investors to move quickly.
Which asset classes and sectors would you recommend?
Wolfgang Seidel: On a one-year time scale, equities and commodities have good prospects. EU and US equities are highly attractive in terms of both, absolute valuations such as P/Es & P/Bs and relative valuations such as dividend yields against real treasury yields & equity risk premiums. Earnings development and earnings sentiment do also look favourable.
Stock picks should be guided by two themes: Many institutional investors are looking at high dividend stocks to replace part of their low yielding fixed income holdings; and economic growth and valuation multiples are high in EMs, but low in DMs. I would therefore favour companies with high dividends/dividend growth and companies listed in DMs with high sales exposure to EMs.
The demand for commodities is driven by global above-trend growth, particularly in emerging markets, where the commodity-intensity per unit of GDP is higher at the margin. As a consequence, commodities with a high sensitivity for the level of growth such as energy and industry metals are attractive. Additional roll yields are achievable with e.g. copper.
In addition, due to the low level of interest rates and a second round of quantitative easing there is a good case for a continuation of the precious metals surge.
Any untapped investment opportunities?
Wolfgang Seidel: Owing to the strong growth of the world population, limited availability of arable land, change of nutritional habits and abating production yield increases there is a strong macro case for soft commodities. Because of negative roll yields in the commodity futures space this segment has to be addressed through direct farmland investments in highly productive countries with still price-inefficient markets such as Brazil. Key will be to find the right investment managers with local presence and networks.
The same demographic and nutritional factors feed into a much higher future demand for water that will cause significant shortages. Water sources will appreciate substantially in value.
Another area is real assets in the oil and gas space, which seems underserved by dedicated fund managers. There are lots of inefficiencies that need specialised expertise, e.g. depleted oil fields that can get extracted further because a) higher oil price levels allow higher deployment of capex, and/or b) modern technologies allow substantially deeper depletions.
More liquid ideas are underpriced EuroStoxx dividend futures and Argentina GDP warrants.
If you had one message to family offices, what would it be?
Wolfgang Seidel: We won the war but we struggle to sustain the peace. In this uncertain economic environment extraordinary vigilance is indispensable.
Contact: Sarin Kouyoumdjian-Gurunlian, Press Manager, marcus evans, Summits Division
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