Deglobalisation, Volatility And Family Office Time Horizons – A Conversation With Dambisa Moyo

When you are an economist and commentator, and have penned books with titles such as Winner Take All, Dead Aid and How The West Was Lost, your views can be counted upon to stir controversy.

Dambisa Moyo is author of the above titles, and more. Her particular take on what drives investment returns and how to think about market trends makes her a popular choice as a thought leader and author. Given the financial dramas since before the pandemic, this news service was interested to quiz Moyo about her views.

And one take-home point of Moyo’s is learning how to stay composed in unsettling times.

“Successful people are focused on structural issues,” she told WealthBriefing, saying that a way for investors to mitigate risk is to stay investing and not be distracted by noise.

For all the problems that now exist – and often magnified via the media – there’s much strength in modern economies, Moyo continued. “Fundamentally it is quite difficult to unwind hundreds of years of success, based on free and open markets, and transparency.”

“We are in the mid-innings of a changing world…we are getting close to a rates’ equilibrium,” she said when asked about rate hikes in the past two years. “We’re going into a period of lower economic growth and higher inflation.”

Moyo, as shown in some of her recent books and articles, thinks the process of “deglobalisation” – a term referring to a fragmentation of trade and business interaction in the past decade or more – hasn’t yet run its course.

“I think it has got further to go. Global trade (flow) peaked in 2007,” she said. “I believe we are going to move into that world and it has fundamental implications for how and why family offices, endowments and others deploy capital.”

Besides her publications, work with a family office and her speaking assignments, Zambia-born Moyo also been a member of the UK’s House of Lords since November last year – Baroness Moyo, of Knightsbridge in the City of Westminster. Moyo is a co-principal of Versaca Investments – a family office, focused on growth investing globally. She also serves on corporate boards including: 3M Corporation, Chevron, and Condé Nast.

WealthBriefing noted that Moyo challenges conventional wisdom on trade, foreign aid, and other topics. Is she a contrarian by choice?

“It is true I am willing to challenge established ideas and conventions where I believe they might be failing – but my underlying focus is always on the long term and seeking to look beyond short-term volatility,” Moyo said. “I like to think of myself as a realist, meaning I try to trade and invest based on my view on what I believe will happen rather than what should happen.”

Moyo’s response to what a world of rather higher interest rates than existed post GFC is an example of that realism: “There’s going to be less capital for `moon-shots’…there is going to be more focus on capital discipline.”

While looking at general trends and themes, Moyo regularly tracks measures of volatility such as the VIX index of US equity option volatility, the gold price and West Texas Intermediate [oil price]. She also keeps a close eye on the US Treasury 10-year bond yield, the slope of the yield curve and yield spreads. On equities, she tracks price/earnings multiples, among others.

“It is important to remember that fortunes are going to be made in difficult times and in more peaceful times,” she said. “If you look at family office portfolios, they don’t need to deviate from allocations to their art, their real estate and their equities.”

WealthBriefing asked Moyo whether her family office position shaped a particular perspective – such as particular time horizons.

“Yes, they are like endowments with much longer, multi-generational time horizons. Family offices tend to be skewed to allocations of one third real estate, one third art and one third equities. They tend not to be invested in risk-free assets like bonds. When dislocations like war or pandemics occur, they tend to use those moments as buying opportunities,” she said.

One area for contrarianism might be demography and challenging the narrative that the world is groaning under pressure of a rising number of people. For all the talk of rising populations, it seems that below-replacement rate births, ageing, etc, might in fact be serious forces and play to ideas about slower growth. WealthBriefing asked Moyo how demography works in her worldview?

“Traditionally the quantity and quality of population would impact GDP growth, according to canonical models. This would mean that a falling population would harm economic growth. However moving into an era of AI could see growth coming increasingly from productivity gains rather from from the labour force – leading to an era of labourless growth,” she replied.

Talk of AI meant that this publication had to ask Moyo what she thinks of all the talk about AI.

“The scope and scale of AI’s impact extends beyond technology and across the economy and wider society. The impact of AI from an investment perspective is therefore broad. It will affect growth, company profitability, the scope and role of government in facing a jobless underclass and growing inequality,” she said.

Finally, Moyo reflected on her blend of roles and how they fit together.

“My work sits at the intersection of public policy, as a member of the House of Lords, business and the private sector, as a member of corporate boards as well as sitting on the board of a not-for-profit endowment fund. While these roles are distinct, together they help me form a more comprehensive view of economic growth and investment,” Moyo added.