Liontrust fund manager James Inglis-Jones has warned that the global economy is in a “very painful deleveraging process” after debts increased to unprecedented levels.
Speaking at the Fund Strategy Investment Summit in Kitzbuhel last week, Inglis-Jones, who co-manages the Liontrust growth and European absolute return funds, said the process was likely to see low levels of growth. “Government debt has grown by three times in absolute terms since the 1980s, corporates have grown their debts by four times and households have seen a staggering six-fold [increase].”
Inglis-Jones added: “We’ve got to a point today where we are literally drowning in debt. When you look at history, there’s never been a point in time when so many countries have had financial debt at the same time.”
However, the European equities fund manager said opportunities might arise during the present period. European companies were being priced at fair value.
“What fair value means is that if you buy into Europe today you’re accessing the potential to access, long-term, quite attractive real returns from equities of 5-7 per cent,” he said.
However, the investment time horizon might prevent investors from putting money into companies over such a long period, he said.
Last week, Mario Draghi, the president of the European Central Bank warned that it would be hard to identify when the eurozone debt crisis would end after Fitch Ratings downgradedGreece by two notches, despite the country having received a further tranche of bail-out funds.