Mavens say there will be 3 drivers in the life of capital markets

A few weeks ago I was interviewing Mario Andretti, the only race automotive driver to be #1 globally for three consecutive decades, and he explained his philosophy, “If you’re not a little bit out of control, You’re not driving fast enough.” As excited as we are about the capital markets, it appears we are a little off track… the bigger question is how the capital markets race will evolve over the next decade and beyond.

When we talk about capital markets, we are about financial markets where equity backed securities and loans are bought and bought to facilitate the flow of capital between investors and debtors. Capital markets play a very powerful role in helping companies, governments and individuals successfully allocate assets through providing opportunities to raise budgets and capitalize on investments, M&A and alternative financial activities.

Considering some of the many structural forces shaping the capital markets environment, here are some ideas to imagine: Global GDP exceeds $100 trillion, although by-product markets are 10 times larger at $1 quadrillion. Is set. , Interest rates continue to rise globally and we are seeing unprecedented geopolitical dynamics taking over at the sector level… and the list goes on.

Given that the capital markets environment will continue to shape the profile and environment of industries in the future, I thought it would be appropriate to convene six business professionals who interact with the capital markets every day to impart capital markets context and insight. They are executives from: Capital Staff, Cognizant, Basic Atlantic, Primary Asset Control, R&T Vault Answers, and Wells Fargo. What emerged is that there are three main drivers of the capital markets.

great transfer of wealth

It is estimated that Baby Boomers, who accumulated the highest wealth levels of any age in history, will transfer approximately $84 trillion of wealth to Millennials and Gen X by 2045. “The transfer of generational wealth from the Baby Boomers will be the most important driver,” explains Maisa Badawi, Head of World Equity Capital Markets at Capital Staff. This will impact the structure of deals and what issuers do with free cash flow. “It will also drive the need for innovation to make different asset classes accessible to people to retire with dignity.”

Kamal Bhatia, President and CEO, Primary Asset Control, talks more about wealth transfer and the heavy picture of what is actually happening, “As retirement assets held by individuals have grown exponentially in the 401k generation, so has the demand for Private market solutions tailored to individual investors have also increased. To achieve long-term retirement goals, the average investor needs access to investment options that are traditionally available to institutional investors. Moving beyond the traditional 60/40 model, and over the past decade, new private markets solutions have come online to provide access to individuals that are free from the tax and liquidity issues that previously kept the average investor on edge. But.”

The era of retail investors

In recent years, there has been a remarkable transformation in the capital markets, with traditional institutional investors increasingly being joined by a growing group of retail traders, motivated through the democratization of investing, technological advances, and additional access to monetary knowledge. .

Justin Kotzin, Head of Capital Markets at Basic Atlantic, referred to the markets from his company’s perspective, “As a global growth equity investor with over 44 years of investment experience, we have seen the impact of structural, macroeconomic changes in the state of capital. The market has experienced the impact directly, amid a declining number of public companies and recent IPO volumes, and is accumulating more AUM than ever before. This is creating an important untapped asset class for retail investors looking for more opportunities to diversify. As we see, there is a lot of AUM and opportunities in the private capital asset class. Which they can ignore in their portfolio.

Despite the decline in IPO volume, IPOs remain a light commodity in the equity capital markets and many marketers are watching for “green shoots” or indicators that the market is preparing to melt down. As corporations with an eye on the travel community reevaluate their IPO playbooks, they will need to account for the retail investor.

Jill Ford, co-head of Fairness Capital Markets at Wells Fargo’s Company and Funding Warehouse, commented: “As retail investors are flocking to the IPO market, we are seeing the ‘everyman’ being heard through a variety of media. Being educated from.” Source. At the same time, we are seeing that private interests are being influenced by where these retail investors want to put their money. When it comes to equity investments, especially IPOs, it should be approached and approached with a holistic mindset. It is no longer ‘growth at any cost’ that will drive demand from institutional or retail investors, and with retail investors, there is also the added factor of individual passion.

AI and technology

We are seeing real-day how AI and AI impact almost every business and extended capital markets. “Creation and access on a real-time basis can be important, and education is also important,” said Nageswara Cherukupalli, business unit head, banking and capital markets and strategic operations, Cognizant. There could be greater standardization and democratization around business. In 5 years, AI could allow retail traders to independently make diverse investment choices, potentially eliminating the need for a marketing advisor. Meanwhile, advisors will remain relevant as funding options continue to adapt, they continue to enhance their capabilities and use AI to bring excellent levels of service to investors. As we strive to promote our provider and strengthen buyer studies, we need to remember that the faster we travel, the more likely we are to fall into speed traps.’

Cherukupalli expanded with insights from Cognizant and Oxford Economics number one analysis, “Our Oxford study showed that over 90% of jobs will be impacted by AI over the next 5-10 years, with software engineers likely to be most impacted. hopefully. As AI becomes more integrated, it will become more important for the industry to focus on upskilling and upskilling talent. From a business perspective, one of the big changes we will see is that more and more regular investors are entering the market and this will inevitably drive more regulations; “For example, the GameStop scenario that inspired and motivated more regulation.”

Joseph Jurkovich, President and CEO of R&T Vault Answers, elaborated on the impact of technology in the banking sector: “Technology has enabled consumers to move their money with unprecedented ease, making it easier for banks to access their funding and liquidity. New challenges have arisen in managing the situation. As regulators update liquidity rules to better address the risk of uninsured deposits, smaller banks that rely on large depositors will need to seek business partners that can help stabilize their liquidity. And help them increase their earnings and franchise value. The stability of our community banking system is important, as the number of banks has declined from 10,000 in 2000 to 4,500 today.

In short, as I started with a quote from Mario Andretti, I’ll end with every other quote he recently told me, “If you’re five cars behind when the track is wet and bumpy There’s a big opportunity to go into first place.” To me this is similar to the capital markets these days where we are clearly going through a rainy bumpy road; This means that there are significant opportunities for the foolish and the wise to get ahead of others for some time.