To sum up the impact of the four key drivers of growth, deleveraging and demographics are quite unambiguously a dampener while energy appears a benign force. The long term trend for productivity is hard to predict. But even assuming a generally optimistic prognosis for productivity, it is quite likely that global growth in the next 20 years is likely to be lower than in the last 20. This means that returns from financial investments are also likely to be lower in the next 20 than in the last 20. Safeguarding long-term returns The modest outlook for long-term economic growth presents a major challenge for government funds to close the widening gap between their financing needs and investment returns. •  On the liabilities side, population ageing in the advanced economies will increase pension claims and place a heavier burden on social services such as healthcare. •  On the assets side, slowing global economic growth will constrain investment returns. There are three ways to narrow this mismatch between trends in assets and liabilities: •  The first is to reduce financing needs by lowering social expenditures or increasing fiscal revenues. Both are politically difficult to do. •  The second is to reach for yield by taking on various combinations of higher leverage, longer duration, and greater credit and liquidity risks. But the public perception and character of government funds limit their scope for aggressive risktaking.
Ravi Menon: Seeking decent returns in an era of sub-par growth Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Sovereign Investor Institute Government Funds Roundtable, Singapore, 6 November 2014. *  *  *  Mr Scott Kalb, Executive Director, Sovereign Investor Institute Distinguished guests, ladies and gentlemen, good morning. The global conjuncture The major economies of the world are at an inflection point. In the US, the era of quantitative easing has come to an end. Next year, for the first time in eight years, we are likely to see a hike in the Fed funds rate. •  The good news is that monetary policy normalisation will occur in the context of a strengthening US economy. •  The bad news is that for financial markets conditioned by persistently easy monetary conditions over the last six years, there is considerable uncertainty over the pace and extent of interest rate normalisation. •  The Federal Reserve has done as best as it can in communicating its approach through forward guidance. But there is many a slip between cup and lip that could to lead to disorderly market adjustments. In the Eurozone, there is tension between restoring public debt to a sustainable trajectory and supporting a faltering economy. •  The ECB has committed to expand the size of its balance sheet by increasing asset purchases, while an active debate rages in Brussels on the appropriate balance between reducing fiscal deficits and supporting growth.