OPEC fights against history, $1-trillion cash manager says
David Hunt, ceo of PGIM, prudential financial inc.’s $1-trillion asset manager, cautioned against overreacting to the surge in oil costs as opec clinched a deal to curtail offer.
“For us United Nations agency are long-term investors, we tend to appear at the cluster of people who are gathering in vienna and say ‘they’re fighting against history,’ ” Hunt said wednesday during a Bloomberg tv interview. “The prices of manufacturing crude, for the most part owing to fracking technology, has dramatically modified the marginal economics of oil.”
Brent crude jumped 8.2% to $50.19 at 4:19 p.m. in London because the Organization of petroleum exporting Countries’ 3 biggest producers -- saudi arabia, iraq and iran -- resolved variations over sharing the burden of cuts to rein in offer for the primary time since 2008. Still, it trades for less than half the value from mid-2014.
Hunt’s PGIM unit invests for clients as well as pension funds, and he said it’s important to have a long view. which means taking into account that the value of crude “is not going back to wherever it was,” regardless of current negotiations, he said. Such a realization ought to influence investors’ approach to oil-importing nations like Japan and india, and to industries like airlines that are huge consumers of fuel, he said.
The money manager conjointly focused on the big image within the broad U.S. stock market, saying that investors ought to guard against excessive optimism once voters selected Donald Trump as president. Equity indexes have rallied since the election.
“The market looked as if it would really want to focus on the pro-growth and pro-business aspects of a Trump agenda, however not necessarily the maximum amount on a number of the chance,” he said, citing the possibility of trade embargoes, tariffs and disruptions tied to the president-elect’s immigration policies. “The markets are terribly optimistic in their interpretation of political risk and to some extent currency risk. and that we would say those 2 are however to play out in a fairly big way.”
Hunt’s remarks build on a statement that he created in could that the search for 100% returns is dangerous. He said wednesday that “the lower-for-longer prediction that we’ve been out with for variety of years can continue.”
This means that managers of pension funds ought to avoid overly aggressive assumptions concerning investment returns once determining how much to set aside for retiree obligations, according to Hunt. He said that several programs for government employees have didn't meet the standards of the private sector and bet an excessive amount of on risky assets.
“Many corporate plans have, over the last range of years, been a lot of realistic concerning the returns that they'll earn,” he said. “They’ve conjointly valued their liabilities in a a lot of realistic way.”
The surge in bond yields when the presidential election may provide a boost.
“With the sort of Trump trade that we’ve seen over the last month, there's reason for optimism that a number of those funding levels that we’ve seen in corporate land can actually rise," Hunt said.