investor daily logo

We never learn, we just shift risk says fund manager

By Eliot Hastie
3 minute read

The thesis of one fund manager into the state of financial markets is that players in the industry never really learn, they just shift risk.

The statement came from Payden & Rygel’s senior vice president Brad Boyd as he spoke about the decade that followed the GFC.

“The world, in terms of financial lessons, we don’t ever really learn. Hubris, greed, ignorance are part of the human experience. It seems we need to learn and relearn and for most of human history it’s about shifting,” he said.

Mr Boyd said economic decline would happen again, but the market could still learn from mistakes of the past and try to stop them repeating themselves.

“In retrospective, it’s easy to look back and understand how this took place. But its far more complex when living in real time,” he said.

Mr Boyd told the room that the market seemed to have fixed major issues like loose regulatory environments, household leverage and easy lending standards.

But he said there were some issues that remained that the market had not fixed.

“Two things I don’t think we’ve solved. I don't think we've solved the ratings agency area and I think we have a resurgence now of over-simplification in models,” Mr Boyd said.

Mr Boyd was hesitant to use the word GFC but said that another issue that could cause problems was the central banks taking on more debt.

“The thesis is, we don’t ever really learn we just shift risk from one area to another, and the next shift is the move for central banks to take on large amounts of debt to the big markets,” he said.

However, Mr Boyd said Payden & Rygel were confident about the future in markets across the globe.

“We feel pretty strong about growth and the fact that most global economies look pretty solid, whether you look at the Australian market or the US or even China, we see positive growth. There are some places where we see that more slowly but nonetheless it looks very firm footing across the board,” he said.

Mr Boyd said that unemployment rates all had a downward trajectory which meant people were working and, despite headlines, wages were growing.

“People keep saying where’s the wage growth. It’s already happening, the trajectory is upwards,” he said.

These figures were heading in the right direction that helped to support the argument that economies around the world were moving in positive directions said Mr Boyd.

“All economies are expanding, some at a slower rate than in the last twelve months while others are faster. This bolsters our argument that global economies are on sound ground,” he said.