January 2011: Hurry Up and Wait

In this issue of Waters, Faye Kilburn’s “Great Expectations” feature outlining people’s prospects for the year ahead was conceived in order to present our readership with a mosaic of opinions from a number of the industry’s different constituents. It would have been odd, to say the least, if everyone’s expectations been the same or even similar, and I’m happy to report that we’ve been able to present 18 different opinions in a single editorial. But if you’re looking to this piece for shared estimations in the hope of identifying trends, you’ll be disappointed: No one, it seems, has a clue what to expect this year—least of all me.

But I’m not alone. I have spoken to many senior people at buy-side and sell-side organizations on both sides of the Atlantic about what this year holds for them, their colleagues and their clients, and the only consistency is that everyone is equally clueless. Perhaps more pressing issues like the $13.5 trillion fiscal gap in the US is weighing heavily on people’s minds. Forget the notion that California is bankrupt—the whole US economy seems to be pretty much in the same boat. But that’s another discussion for another time.

What is more pertinent to our industry for the year ahead is the likelihood of significant and far-reaching regulations coming down the pike, although when exactly this will occur and what those new mandates will look like is anyone’s guess.
I was in New York recently for the Waters USA conference where I moderated the CIO panel discussion, which covered, among other things, the capital markets’ outlook for the year ahead.

The discussion turned to regulation, which, as it transpired, turned out to be a little underwhelming. Peter Kelso, managing director, global CIO at DB Advisors and global CIO at Deutsche Insurance Asset Management, was one of the five panelists, and anyone who knows Peter or who has listened to him speak at an event will be familiar with his frankness. When pressed on the issue of impending regulations and how they might affect his firm, he was characteristically candid: “On the buy side, we are not sure yet—we have a meeting with the Securities and Exchange Commission (SEC) in early January and with the Federal Financial Supervisory Authority in Germany (Bafin) sometime in the first quarter of 2011, but right now we are not real sure what that’s going to mean to us,” he said.

Kelso’s vagueness isn’t peculiar to his organization. A number of buy-side and sell-side firms I have spoken to have adopted similar wait-and-see strategies, which can be used as a pretty reliable barometer for the industry as a whole, an industry primed for change, but nonetheless still in the dark as to what those changes will entail.