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Varnholt loves to show his audience a short video clip of two teams playing a friendly game of basketball, and asks them to focus and count the number of times the team wearing white uniforms passes the ball to each other. Over the course of the year, he has shown this video to more than 4,000 investors, bankers and analysts in Asia, Europe and the Middle East.
Many made the effort to count and gave the right answer. But very few noticed what should have been obvious to everyone from the start û a huge gorilla that walked to the middle of the court and stayed there for quite some time while banging his hands on his chest.
Using his video as an analogy, Varnholt says most investors are too preoccupied looking for that one great investment idea and they are missing out on the opportunities that are there for the taking.
ôThe global economic boom is the gorilla-theme of this decade,ö says Varnholt, who was in Hong Kong recently to meet with clients of the Swiss private bank.
One clear sign that investors are generally ignoring the growth potential of the global economy is the abundant level of liquidity in financial markets worldwide, which is at its historic peak.
ôThat is the most honest expression of investor scepticism over the economy,ö he says.
Varnholt believes there are three main structural drivers of the economy, and although they may not be extraordinarily interesting investment themes, they are the ones investors should focus on. These drivers are population growth and migration, trade, and technology and infrastructure, which are all connected, he says.
For instance, ôage distribution will influence asset valuations and economic development,ö he says, noting that half of the population in emerging markets have not even reached the age of 30.
Varnholt is highlighting thee major investment themes: the quest for basics, the quest for enrichment, and the rising importance of emerging markets.
The quest for basics theme should lead investors to seek exposure in infrastructure, energy, water, food and security companies, he says. He notes that natural resources have the potential of being a strong asset class in the future.
The quest for enrichment theme should point investors towards premium brands in the retail market, consumer technology, and companies that profit from promoting healthy living, he says.
Varnholt favours looking at investment themes, rather than focusing of specific markets, but notes that the rapidly developing emerging markets is a theme in itself. Taiwan is an example of an emerging market that is ôvery undervaluedö in relation to the share prices of its listed companies and to the technological advancement of companies there, he says.
Investors still favour private equity assets for their higher growth, better governance structures, and diversification potential.
The recent focus on greenwashing has put bond issues under greater scrutiny. However, some market participants believe this risks paralysis by analysis.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.