Speaking on the ‘The Stagnation Equation: Does Capitalism Need a Reboot?’ panel at the Bloomberg New Economy Forum in Singapore, CEO Raphael Arndt said the US has long been a remarkable economy and market that has done “incredibly well” since World War II.
However, he noted that President Trump’s administration has forced the sovereign wealth fund to reconsider the landscape.
“We have an extremely large exposure [to the US]. It’s almost half the portfolio, and we’ve benefitted greatly from that, as has the world,” he told the live panel.
“As a sovereign investor into the US, some of the retaliatory tax provisions in the one Big, Beautiful Bill Act, which were repealed, really alarmed us.
“As a result of that, and some of the volatility we’ve seen around trade policy after liberation day, we’ve already made the decision to reduce our US exposure and have done that and continued to do that.”
Arndt said he still sees significant opportunity in the US, but policy confusion is undermining investor confidence.
“It will remain our largest exposure, but it’s just a riskier place to invest than it used to be. And we’ve lifted the expected return we need as a result. There seems to be, there is a tension,” he said.
“We want to know what are the rules around trade, capital flows, taxes, regulation? They are changing … they’re changing with not much predictability – and that does concern us.”
When it comes to global capital markets, Arndt said the current system still works but needs improvement.
“This system we’ve got is for sure the best system there is to allocate resources, create jobs, grow wealth, grow the pie for everyone. But it’s far from perfect.”
“[Capitalism] doesn’t get things right very regularly. It moves forward, it moves back, governments regulate more, less, people feel they’re participating or not.”
He said the vast leveraging of the economy since World War II – and a series of crises over the last two decades – have made wealthy people wealthier, without necessarily helping young or working people participate in the economy.
“There’s a rising view of inequality right around the world. And that’s leading to more populous policy, more intervention in markets and in general, that’s a bad thing – it leads to lower growth, a smaller pie, more inflation, and that’s not good for society.”
In Australia, Arndt said the Future Fund has been reassessing how it invests.
“We feel like as a government investment fund, it’s our job not just to invest well, but to help everyone get better together,” Arndt said.
“We’ve started to issue discussion papers on the issues we say in the world, the fundamental change that’s going on, what that might lead to, and what can be done about it.”
Arndt believes the capitalist system struggles to think across generations.
“It gives wealth, or if you take risk to people who already have it or have built it up through their lifetime.”
Engaging younger generations in economic participation, he said, is crucial.
“We need to spread the wealth. We are growing the whole pile for the whole population. And if you can save for your retirement or access funding, because you’ve got an idea – you want to start a business or grow a business – that’s how you grow the pie.”
Bloomberg head of economics and government, Stephanie Flanders, asked Arndt what interventions help build confidence in the system. Arndt pointed to Australia’s compulsory superannuation model.
“[Australia’s] got amongst the highest median household net wealth in the world. Why? Because we have a compulsory savings system in superannuation – it has been around for 40 years now,” he said.
“That means everyone who works in any job has to put money away for their retirement.”
Fellow panellist and Chair and CEO of NASDAQ, Adena Friedman, agreed, adding “it is an incredible model what’s been created in Australia.”
“The superannuation funds are an incredible creation. I think that if we were to restart the United States, that would be a model that we should really kind of lean in on, because it allows everyone to have an opportunity to engage in the economy, to be an owner of the economy for their life.”
She said Trump’s US$1000 newborn accounts could open similar doors.
“There is something that came out of the Big, Beautiful Bill … where every newborn starting January 1st in the United States is going to be given a US$1,000 investment account. That’s going to be professionally managed through index funds – they will not be able to take that money out until they’re 18.
“It gets them engaged in the US economy in a way that just doesn’t happen today. It is one of the most innovative things that we’ve seen coming into the financial system in a long time in the United States – and we’re very excited about it.”
Flanders closed with an audience question: ‘Which part of the existing financial markets do you want to change or eliminate if you have a magic wand?’
The head of Latin America’s largest fintech bank, Nubank, answered: “I think a magic wand is going to be tokenisation of assets,” founder and CEO David Velez said.
He believes tokenisation will increase access to investment types and markets in ways previously impossible.
“Brazil or Latin America, for example, has very little access to the world capital markets. With tokenisation, you’re going to be able to have Singaporean investors buying credit cards, receivables of a Brazilian city.
“You’re going to have all of these with a lot of transparency in a centralised market around the world. I think that will solve a lot of the liquidity, that will solve a lot of the access, that could provide a lot of transparency – and that might be a big facilitator of going or taking capital to areas of the world that does not have access to that type of capital,” he said.
