Investment Conundrums: LGIM's CIO Anton Eser on what could cause the next financial crisis

Anton Eser of Legal & General IM

Fears over the next financial crisis are a key concern for the investment committee at Legal & General Investment Management (LGIM), with chief investment officer Anton Eser arguing the last crisis was poorly handled.

Eser took over as CIO in November 2016, replacing Aaron Meder, who has moved into the role of chief executive of LGIM America. Prior to this role, Eser had spent a decade at the firm as co-head of global fixed income and manager of the firm’s global credit portfolio.

Speaking to Investment Week, the CIO said the actions of central banks in the years following the global financial crisis have led to the rise of populism in countries across the globe.

“In the aftermath of the global financial crisis, we treated problems with liquidity, which meant the structural issues of the crisis were not dealt with. We only maintained the status quo,” he said.

He argued central bank policies had only “inflated the assets of the rich”, fuelling the popularity of the likes of Labour leader Jeremy Corbyn in the UK, and populist US President Donald Trump.

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“There needs to be a long-term change in the approach to central bank policy, but it would take a shock to the system for this to occur, it will not just happen automatically,” Eser added.

After years of quantitative easing, central banks globally are moving towards a policy of monetary tightening; the Bank of England is looking to raise rates, the Bank of Japan is cutting back on its easing measures, the Federal Reserve is looking to unwind its balance sheet and the European Central Bank is set to begin tapering.

Since the crisis, regulators in the UK and US have also addressed failings in the banking system.

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These include higher capital buffers which banks must hold, a clampdown on pay and bonuses, an annual tax on banks’ balance sheets and the ring-fencing of risky investment banking divisions from retail banking arms. 

But Eser said this did not mean other areas of the financial system did not have the potential to cause a future crisis. 

“The next financial crisis will not be a banking crisis as this sector is different from how it was in 2008, but there could be a eurozone crisis or a corporate bond or a sovereign debt crisis instead,” he said.

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