2016 global market outlook - william blair funds · 2016 global market outlook december 2015 | 2...

December 2015

2016 Global Market OutlookExploring Opportunities in Developed and Emerging Markets

Simon FennellPartner, Portfolio Manager

Olga BitelEconomist

2016 Global Market Outlook December 2015 | 2

SummaryThere is no question that 2015 was a year of increased market volatility. We saw unrest in the Middle East, tensions in Europe, a slowing Chinese economy, and a guessing game over what the U.S. Federal Reserve (Fed) would do with interest rates. These factors, among others, put investors on edge.

Amid the noise, fi ve themes dominated the year. These include the proliferation of technology, a change in the hydrocarbon order, and Chinese growth, which are likely to be enduring. In addition, weakness in the emerging markets appears to be cyclical, and the rising U.S. dollar seems transient.

As further detailed in this white paper, we believe: • The period of rapid U.S. dollar appreciation is behind us. Looking forward we anticipate

greater currency stabilization, with a strong but no longer strengthening U.S. dollar.

• From an investment perspective, technology is the most important and enduring theme in the global capital markets, as it is scaling faster and further than it ever has before.

• A change in the hydrocarbon order is clearly upon us as energy moves from being a discussion about extraction into a technology issue.

• China—a tale of two economies, old and new—is likely one of the most enduring stories not just for 2015 and 2016, but for decades to come.

• While the outlook for the emerging markets has been blighted by currency headwinds, there is little scope for this level of magnitude of underperformance moving forward. And since this is a very heterogeneous group of countries, country selection, and even selection within sectors, industries, and companies, is paramount.

As for our 2016 outlook, we believe: • Global gross domestic product (GDP) growth of 3% is possible.

• There are specifi c opportunities at the country and company level in the emerging markets. From a broad perspective, we believe that a cyclical emerging market recovery is not unrealistic despite the prevailing doom and gloom.

• Structural disinfl ation will continue, driven by technology.

• There will be continued uncertainty regarding the exit from unconventional monetary policy outside the United States.

• Volatility in the deleveraging of the commodities complex is likely.

• Risks heading into the new year include wage growth, lower capital expenditures, and corporate taxation policies.

William Blair Economist Olga Bitel and Portfolio Manager Simon Fennell shared their perspectives on today's changing global marketplace and explored the investment opportunities in developed and emerging markets at our 2016 Global Market Outlook.


OverviewThere is no question that 2015 was a year of increased market volatility given today’s unstable world. We saw unrest in the Middle East, increased fears of terrorism, tensions in Europe, a slowing Chinese economy, a guessing game over what the Fed would do with interest rates, and myriad headlines from U.S. politicians running for president. These factors, among others, made markets edgy and contributed to a low-growth market sentiment that was widely touted by the press.

Specifi cally, fi ve themes dominated the market’s reassessment of growth prospects in 2015: 1) U.S. dollar strength; 2) the proliferation of new technology; 3) a shift in the established hydrocarbon order; 4) China’s growth; and 5) emerging market malaise. We believe themes two, three, and four will endure beyond 2016. The emerging markets, an area of focus for William Blair for many years, are clearly out of favor at the moment, but we believe the downturn is cyclical. Lastly, we believe the strength of the U.S. dollar, which was key throughout 2015, is a more transient theme.

Despite this volatility, we believe there are growth opportunities in 2016, many in familiar places: North America, Europe, China, and even the emerging markets. But before we review in depth the themes that dominated 2015 and our outlook for 2016, we will quickly review 2015.

2015: A Year in Search of DirectionThe S&P 500 Index has been roughly fl at since the beginning of the year, with marked volatility. Global GDP growth has been solid, but at 3%, it is one to two percentage points below the pre-global-fi nancial-crisis level (5.2% in 2007). As a result, it feels slightly anemic.

Meanwhile, infl ation, which we talked about in our 2015 Global Market Outlook, has edged even lower, with defl ation and disinfl ation continuing to be major drivers of market sentiment. Commodity prices have been a focal point, with supply growth and a continued demand slowdown responsible for West Texas Intermediate (WTI) hitting $37 a barrel.

Taking a closer look at returns for 2015, we fi nd that the emerging markets have notably underperformed almost all other asset classes (fi gure 1). That underperformance was largely driven by very weak and declining commodity prices.

Looking at global sector performance, leadership has come from the consumer-related services sectors and technology. Sectors geared more toward energy and materials, and parts of the industrial space supplying those sectors, have underperformed.

Looking at region and country returns, Japan is striking. Over the past several years, we have been focused on the changes in Japan. At the macro level, those changes are ongoing, but the story in Japan this year has been relatively quiet. The focus has shifted to the micro level as companies have improved corporate governance and become more forward thinking in terms of shareholders and return generation. Essentially, everything we were excited about in 2012 and 2013 is starting to come to fruition, and therefore it is not surprising to see Japan ranking highly in terms of performance. From here on out, we expect Japan to be much more of a micro story of corporate governance and return generation, playing out quietly, away from the headlines.

Leadership has come from the consumer-related services sectors and technology.


Over the past 18 months, the U.S. dollar strengthened by 15% to 20% against a broadcurrency basket.

Looking forward we anticipate greater currency stabilization,with a strong but no longer strengthening U.S. dollar.

Sources: FactSet, Russell 3000, MSCI EAFE IMI, MSCI EM IMI, Barclays Global High Yield, Barclays Global Treasury. As of 11/30/2015. Past returns are no guarantee of future performance. A direct investment in an unmanaged index is not possible.

Fig. 1: Year-to-Date 2015 Returns Retrospective (%)

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Fig. 2: U.S. Dollar Exchange Rate Broad Measure

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Theme 1: Most U.S. Dollar Strength Is Behind UsOver the past 18 months, the U.S. dollar strengthened by 15% to 20% against a broad currency basket (fi gure 2). Two forces drove this steep rise.

The fi rst force was technology-enabled shale discoveries, which drove the ability to successfully extract oil and gas. As a result, U.S. oil production increased signifi cantly starting in the second half of 2012—so much so that it had a meaningful impact on the U.S. current account defi cit. Less than fi ve years ago, the U.S. current account defi cit, just from petroleum-based products, averaged around $30 billion a month. Today, that number is less than $10 billion a month and declining. This is a meaningful impact, and has been a signifi cant tailwind for dollar strengthening.


We believe technology is the most important and enduring theme in the global capital markets.

The second force driving U.S. dollar strength has been the debate about monetary policy normalization amid sustained economic growth in the United States. When is the Fed going to hike? June? September? This uncertainty dominated market sentiment amid relatively robust U.S. growth in a global environment in which growth was lackluster or decelerating almost everywhere else.

We believe that these forces are abating, pointing to stabilization of the dollar moving forward. Europe is recovering and European corporates are experiencing a tailwind from the weaker euro at a time when the strong U.S. dollar is beginning to aff ect U.S. corporate profi ts. This is a signifi cant reversal. At the same time, global growth is recovering more broadly, such that growth diff erentials are no longer as dramatic as they were two years ago. Both the Fed and European Central Bank (ECB) are keen to maintain appropriate monetary policies for their respective jurisdictions, reducing the risk of strong currency moves.

All of this suggests that the period of rapid U.S. dollar appreciation is behind us. Looking forward we anticipate greater currency stabilization, with a strong but no longer strengthening U.S. dollar.

Theme 2: Proliferation of New TechnologyFrom an investment perspective, we believe technology is the most important and enduring theme in the global capital markets. Technology is also critical to business processes, as it remains a key driver of corporate performance. In our opinion, there is an inevitability to technology that is clearly demonstrated by Moore’s Law and the impact on the cost curve.

We believe that technology can continue to proliferate because it is scaling faster and further than ever before. We have moved from an environment in which assets were based on hard goods to an environment in which software, data analytics, artifi cial intelligence, and deep learning dominate. This will continue to radically change return profi les, not just in technology, but in every industry. The scalability of technology will create haves and have nots at both the corporate and geopolitical level.

Reality or Hype?There is no area more prone to hype and hoax than the technology sector. We saw this clearly in the dot-com era of the late 1990s leading into the crash of 2000. In this era, the Nasdaq Composite Index led the U.S. market and is now leading again. We observe this in terms of returns as well as corporate performance, as technology companies continue to deliver strong operating margins.

Figure 3 shows select U.S. index performance since 1995. In August 1995, Netscape went public, with more than 40 million global online users, which seemed massive. But by the height of the dot-com madness in 2000, that number had grown to 400 million, and the market seemed fully saturated. Today, it is projected that there will be 4 billion global online users by 2020. To put that in perspective, the global population is only 7 billion. So, the world will be nearly completely connected by 2020. More importantly, we will be connected with devices that are at least 300 times more powerful than those used in 1995. We expect these trends to continue, and we believe they will continue to change the nature of corporate performance.


Sources: Deutsche Bank estimates, public company filings. As of 11/3/2015.

Fig. 4: Cloud Solutions Lead to More Computing Power at Lower Cost

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Cloud Solutions Lead to More Computing Power at a Lower CostThe venture capital fi rm Andreessen Horowitz says that software is eating the world in terms of its importance.1 We believe there is truth in this, and we would put mobile computing in the same realm. As a result, business models continue to evolve, and they are scaling very quickly.

This year has been interesting in terms of growth and scaling. The fastest-growing technology company ever at the enterprise level is a cloud-computing platform that is rapidly growing its top line at 80% and by its own estimates is projected to reach $10 billion next year. Only Google and Facebook, in the consumer space, have matched this level of growth. The signifi cance cannot be overstated as cloud computing is allowing scalability within technology that we have never seen before. This scalability drives a higher growth and return profi le not just for the company off ering the cloud-computing platform, but more importantly for users more broadly, and it changes the rules of the game. Netfl ix is the most obvious example of a company using cloud computing, but Goldman Sachs is also a user, and GE has decided to outsource 70% of its computing power to cloud computing. The multiplier eff ect of technology will be more evident as cloud computing continues to gain share across industries and begins moving across countries.

Source: Bloomberg, FactSet. January 1995=100. Past returns are no guarantee of future performance. A direct investment in an unmanaged index is not possible.

Fig. 3: Select Index Performance

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Cloud computing is allowing scalability within technologythat we have never seen before.

This scalability drives a higher growth and return profile for users more broadly, and it changes the rules of the game.


How does this scalability benefi t the individual? In 1995 or 2000, the cost of launching an Internet start-up was about $5 million. Today, using cloud computing, the cost is $5,000—99% less than 15 years ago.

We have seen, and will continue to see, a rapid change in the nature of scaling. WhatsApp, the mobile messaging app, is an interesting example. There are 20 billion SMS messages sent via global telecommunications systems, versus 30 billion sent via WhatsApp. The fact that WhatsApp handles this volume with only 24 employees is remarkable. From an earn-out point of view, the price Facebook paid for WhatsApp is increasing on a daily basis, and the scaling is very impressive.

The benefi ciaries of this scalability are not found only in technology. It is almost trite now to talk about what online retailing is doing for consumer convenience, but the impact on consumer prices is also signifi cant. Walmart, which radically changed retail, has 150,000 stock keeping units (SKUs), an enormous number. Amazon has 380 million. That scale has lowered prices, and we have seen decent growth in retail sales volumes—so the impact of technology scalability in retail is extraordinary.

Although technology will continue to be a benefi ciary of scalability, it is not all positive. The impact technology is having, though broadly positive, is also clearly negative in parts of the economy. In our opinion, it is no coincidence that for some time we have seen the decline of traditional booksellers, Walmart numbers have been weakening, and Nordstrom’s sales have been decelerating.

Innovation Across IndustriesMuch of the discussion of technology centers on developed markets—the United States, Europe, Japan, and to some extent Korea. But technology is potentially helping the emerging markets even more.

Consider remittances, and in general, the whole back offi ce of the fi nancial market—payments, clearing, and settlement. The World Bank has recently estimated that the global remittances market is around $580 billion. Migrant workers pay, on average, about 8% to send their hard-earned money to their loved ones, but today’s available online technology can send those payments free, instantaneously, anywhere in the world, without any physical presence required on the other side. All you need is a telephone that is connected to the Internet. That not only disintermediates middlemen, but it also enables a much faster transfer and puts substantial extra money—potentially between $50 billion and $100 billion—into the emerging markets. Importantly, this is not an isolated occurrence, as it aff ects three to four billion people.

Two other companies that have seen tremendous technological innovation are Uber and Airbnb. To us, they speak to a broader disintermediation within established business models or hierarchies. The speed of disruption is clear, and we believe it will occur across geographies and business models for some time. Where there is old-fashioned economic rent that has been extracted for some time, there will be disruption and the move will be very fast. That is what we mean when we say that technology has its own ambition. At the same time, the complexity of the technology itself is increasing barriers to entry for those that are not technically sophisticated or savvy. The magnitude of the disintermediation possible from an asset-light model provides for a very attractive return profi le.

The beneficiaries of this scalability are not found only in technology. The impact on consumer prices is also significant.


Theme 3: Changing the Established Hydrocarbon OrderA change in the hydrocarbon order is clearly upon us. This time last year, we were observing the reaction of the Middle East, most notably Saudi Arabia, to shale. The big issue was exactly what OPEC would endorse in terms of production. Today, we believe Saudi Arabia is being fairly intelligent in managing its asset base. From our perspective, the most important and enduring issue in energy is the impact of technology. We believe energy may have moved from being an extractive industry to a technology-driven industry. Figure 5 shows when fracking technology came in to play, and fi gure 6 shows the immediate price reaction. As well costs have declined, so too have oil prices.

How much is that going to change moving forward into 2016? Is $37 per barrel the right number? What we do know from a technology perspective is that Moore’s Law leads to lower marginal costs supporting low prices. As an extractive industry, oil has a naturally increasing marginal cost curve. These two forces are in clear confl ict right now, but with WTI at $37 per barrel, it appears that technology is winning the argument.

From our perspective, the most important and enduring issue in energy is the impact of technology.

Sources: Hess Corp, William Blair analysis estimates.

Fig. 6: U.S. Shale Production, Well Cost vs. Oil Price

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Fig. 5: U.S. Production of Crude Oil, in Million Barrels per Day

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Theme 4: Chinese GrowthChina is one of the most enduring stories, not just for 2015 and 2016, but for decades to come. We can debate whether its growth rate is moving from 10% to 7%, 5%, or 3%, but what is more interesting from our perspective is the nuance and complexity of that growth.

We believe China is a tale of two economies. The fi rst part of the story is the industrial sector, the old growth engine of China. This includes heavy, extractive industry and the industrials that supply it—for example coal, iron ore, steel production, and heavy machinery. We think this complex is growing at a rate of anywhere between 0% and 3% per year (fi gure 7). This is much slower than anything we have seen in the recent past, feeding the headlines for a bear case on China.

There has been vast restructuring in China, and a lot of extra capacity still needs to be rationed away, but the industrial complex is not falling into the South China Sea any time soon. There are hundreds of thousands, if not millions, of companies in China that are quietly but steadily moving up the value chain. We see it in the numbers and in observable changes in competitive behavior.

The auto industry is one of our favorite examples because it combines industrials and consumers, and everyone can associate with car ownership. Figure 8 illustrates that in 2000 the quality of cars made by Chinese companies was so poor that almost no onewanted to own them.

Fig. 8: Problems per 100 Vehicles (Difference Between Chinese and International OEMs, Initial Quality Study)

Sources: IHS Automative, 2015.

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China is one of the most enduring stories, not just for 2015 and 2016, but for decades to come.

Source: Wind, Goldman Sachs Global Investment Research, Bloomberg, National Bureau of Statistics, William Blair. New China includes GICS Sectors: Healthcare and Information Technology and GICS sub-industries: Education, Publishing, Advertising, Movies & Entertainment, Travel & Leisure, Internet Retail, Environmental Services, and Renewable Electricity.

Fig. 7: “New” China Has Managed to Deliver High Top-Line Growth in a Slowing Economy

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In that year, the number of complaints received in the fi rst six months of ownership was so high that it did not matter how cheap these products were; they were just too bad to own. Today the quality diff erential is almost gone, and it has disappeared at the lower end of the price spectrum. In other words, for the right price, Chinese consumers are willing to entertain the option of buying a locally made car. Many well-established American, European, and Japanese automakers grew accustomed to an underpenetrated or a completely unpenetrated Chinese market with very little competition and considerably outsized profi t margins. As fi gure 9 shows, most had tremendously stronger profi t margins in China than almost anywhere else in the world. As Chinese automakers improve, the market dynamics are changing, and it is becoming harder to compete. We hear discussion of demand erosion and destruction, as well as decelerating growth in car sales among the multinationals. Among that rhetoric, there are real competitive threats because the local Chinese automakers are reporting considerably better numbers.

Importantly, this force is occurring in a number of other industries and subsectors. The second part of the story is consumer services, at just over 50% of China’s GDP growth today and growing rapidly.

Headlines of decelerating retail sales growth in China were prevalent in 2015. Figure 10 shows that real retail sales (sales minus infl ation) are growing by an average of 10% per year. This is the best consumption story on the planet by a very wide margin. In the United States and Europe, we are excited about retail sales growth picking up to 3% or 4%. In China, the discussion is about deceleration to 10% from a very large base.

For the right price, Chinese consumers are willing to entertain the option of buying a locally made car.

Sources: IHS Automative, 2015.

Fig. 9: Net Profit Margin Comparison (2013)

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Fig. 10: Retail Sales Volume in China

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Is the marked deceleration of same-store sales growth over the past couple of years due to demand destruction or low wage growth? In China, we believe neither is the case. We do not see demand destruction or tremendous deceleration in consumption in China. Consumption is well supported with wage growth still averaging around 7% to 8%. Instead, there is a phenomenon of moving up the value chain. Consumers are becoming more selective as local brands off er increasingly better values and opportunities.

We believe that this changing dynamic has more to do with the unexpected proliferation and rapid rise of e-commerce in China. E-commerce did not exist in China in 2008, in that it was not captured in the offi cial retail sales statistics. As a result, no one has paid attention to it. Today, e-commerce is 10% of GDP and 14% of retail sales. Importantly, it is growing by more than 40% per year, which means that it is eff ectively doubling in size every two and a half years. The proliferation of e-commerce presents an opportunity for small- and micro-cap companies to have a presence in the retail market, reaching millions of people that they would never reach with a purely physical footprint. This is defi nitely an important and enduring force driving one of the world’s largest economies.

The strength of the Chinese consumer is also increasingly manifesting itself abroad, as fi gure 11 illustrates.

Chinese tourism is picking up in earnest, and Chinese spending is growing quickly. This is the case not just in Asia but in Europe. Even if we assume modest 4% or 5% growth rates for the Chinese economy moving forward, within 10 years we will have at least another 200 million consumers in the middle class. This is a signifi cant increase in consumers who will have the ability to travel abroad for holidays with their families. This anticipated growth will dwarf the tourism data shown in fi gure 11.

Lest anyone think that Chinese leaders are behind the times, fi gure 12 summarizes the areas of growth they have identifi ed in their long-term planning, consistent with their continued focus on rebalancing the economy.

Sources: UNWTO, ForwardKeys, WSJ, CEIC. As of 9/30/2015.

Fig. 11: Spending by Chinese Tourists Overseas (in Billions)

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Fig. 12: Ten Priority Fields for Development

Source: Wind, Goldman Sachs Global Investment Research, Bloomberg, National Bureau of Statistics, William Blair. New China includes GICS Sectors: Healthcare and Information Technology and GICS sub-industries: Education, Publishing, Advertising, Movies & Entertainment, Travel & Leisure, Internet Retail, Environmental Services, and Renewable Electricity.

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Theme 5: Emerging Market Sentiment Remains WeakAs we noted previously, emerging market equities had a diffi cult performance year, so it is not surprising that investors withdrew capital broadly from emerging markets. Outfl ows have been substantial, as fi gure 13 illustrates.

There has been no shortage of negative headlines in the wake of commodity weakness, a stronger U.S. dollar, and concerns about a potential debt crisis. We do not anticipate a widespread emerging market debt crisis. Taking a step back, we believe it is a disservice to describe the emerging markets as a homogenous group. They consist of heterogeneous countries lumped together simply because they are not developed markets. The 23 diff erent countries that constitute the MSCI Emerging Markets Index all have diff erent demographics, economic conditions, and political landscapes—a fact that has become increasingly obscured by the proliferation of exchange-traded funds and other index-tracking products focused on the emerging markets.

Source: BofA Merrill Lynch Global Investment Strategy, EPFR Global. As of October 2015. Not intended as investment advice.

Fig. 13: Weekly Fund Flows into Emerging-Market Equities

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Fig. 14: November 2015 Global Asset-Class Positioning Relative to History

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Figure 15 breaks down GDP growth and projections for emerging market countries that are heavy commodity exporters and manufacturing economies versus developed markets. The growth diff erential between the manufacturing countries and developed markets is quite high and relatively stable. In other words, many emerging market economies are doing relatively well.

Those countries that are faring poorly are commodity exporters—oil, iron ore, and copper exporters, for example. Their GDP growth rates have declined signifi cantly.

As highlighted in fi gure 16, the vast majority of the emerging markets actually benefi t from weaker commodity prices.

Sources: Emerging Advisors Group. As of 11/30/2015.

Fig. 15: Real Growth in Developed Markets vs. Emerging Markets

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Fig. 16: Change in Terms of Trade

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70% of the MSCI EM Indexhas benefitted from a declinein commodity prices

The vast majorityof the emerging markets actually benefit from weaker commodity prices.


The U.S. dollar has strengthened against a broad basket of emerging market currencies. As a result, emerging market manufacturers and exporters selling goods and services to the United States and Europe have reasonably resilient demand and increased competitiveness, as their currencies have depreciated by an average of 15% versus the dollar.

The outlook for the emerging markets has been blighted by currency headwinds, but we believe there is little scope for this magnitude of underperformance moving forward. And since this is a very heterogeneous group of countries, country selection (and even selection within sectors, industries, and companies) is paramount. In the coming months and quarters, we believe many emerging market companies will begin to see their sales numbers revive, and that should fl ow through to improved margins given continued cost discipline.

Risks of the Current EnvironmentIt would be impossible to provide an exhaustive list of the risks of the current environment as we head into 2016. We have thus outlined four areas of focus.

First, if the outlook for technology is as upbeat as ours, it is also important to understand the impact on the wage profi le of countries globally. From a global perspective, there has been no wage growth since the early 1980s. One of our biggest focuses within Japan has been whether it can obtain wage growth to drive the success of Abenomics—and so far it has been diffi cult. There is some wage growth in the United Kingdom, and in the United States this topic is a large bone of contention politically.

From a capital fl ow point of view, the proliferation of technology is allowing growth in asset-light industries. We are clearly going to see lower capital expenditures, and there are clear challenges to traditional concepts of GDP. Are current statistics accurately capturing the level of productivity in the new areas of commerce? Do we understand exactly how this new environment is going to play out? We believe that there is risk in that we may not fully appreciate how the economies are really working.

From a labor force point of view, there is clearly a skills mismatch, particularly in advanced, technologically savvy areas. This is apparent in the market, as AWS’s success has come at the expense of IBM or Hewlett Packard or EMC. There are also geographical and geopolitical implications that are not as readily apparent.

Lastly, on the taxation side, it is diffi cult to be upbeat about technology if none ofthe technology companies pay taxes. Tax-avoidance strategies that use payments between related entities to shift income to lower-tax domiciles are increasingly under scrutiny. This will present an issue for many companies if and when policy changes are implemented.

2016 OutlookGoing into 2016, we are still anticipating growth. However, the growth profi le is not glamorous, with 3% global GDP growth possible. The U.S. numbers are solid but not exciting. European growth is led by Ireland, which may come as a surprise given how poor Irish performance was coming out of the global fi nancial crisis. The United Kingdom is anticipated to get close to 2% GDP growth. Spanish GDP growth is actually quite compelling, as is the country’s export profi le. Although France’s numbers are defi nitely aff ected in the short term by the recent terrorist attacks, we are hopeful that there will be an upswing as we move forward.

The currency adjustment that we have talked about from a foreign exchange point of view in the emerging markets will be key. From a broad perspective, we believe that a cyclical

In the coming months and quarters, we believe many emerging market companies will begin to see their sales numbers revive, and that should flow through to improved margins given continued cost discipline.


emerging market recovery is not unrealistic despite the prevailing doom and gloom. We believe there are specifi c opportunities at the country, sector, and company levels in the emerging markets.

We believe that cyclical defl ation will continue, but the noise will dissipate as a result of favorable year-over-year oil-price comparisons. However, structural disinfl ation, a focus of our 2015 Global Market Outlook, will continue, driven by technology.

There is considerable uncertainty regarding the exit from unconventional monetary policy. In contrast to the United States, Europe is expected to maintain policy accommodation. The prospect of continued easing measures and the uncertain timing surrounding their unwinding are risks for Europe. The impact of negative interest rates in the Scandinavian block is signifi cant, for example, and the resolutions are problematic.

Lastly, we anticipate continued volatility associated with the deleveraging of the commodities complex, as there is $1 trillion of debt in the global commodity system.

We anticipate continued volatility associated with the deleveraging of the commodities complex, as there is $1 trillion of debt in the global commodity system.

1The Wall Street Journal. As of 8/20/11.


About the AuthorsSimon Fennell, partner, is a portfolio manager for William Blair’s International Growth and International Leaders strategies. He joined William Blair in 2011 as a TMT research analyst focusing on idea generation and strategy more broadly. Before joining William Blair,Simon was a managing director in the equities division at Goldman Sachs in London and Boston, where he was responsible for institutional equity research coverage for European and international stocks. Previously, Simon was in the corporate fi nance group at Lehman Brothers in London and Hong Kong, working in the M&A and debt capital markets groups. Education: M.A., University of Edinburgh; M.B.A., Johnson Graduate School of Management, Cornell University.

Olga Bitel joined William Blair in 2009. She is responsible for economic research across all regions and sectors. Before joining the fi rm, Olga was a senior economist at the National Institute of Economic and Social Research in London, United Kingdom, where she was responsible for macroeconomic forecasting and thematic research projects for international organizations and government bodies. Education: B.A., University of Chicago; M.Sc. in economics, London School of Economics and Political Science.

About William BlairWilliam Blair is committed to building enduring relationships with our clients and providing expertise and solutions to meet their evolving needs. We work closely with private and public pension funds, insurance companies, endowments, foundations, sovereign wealth funds, high-net-worth individuals and families, as well as fi nancial advisors. We are 100% active-employee owned with broad-based ownership. Our investment teams are solely focused on active management and employ disciplined, analytical research processes across a wide range of strategies, including U.S. equity, non-U.S. equity, fi xed income, multi-asset, and alternatives. As of September 30, 2015, William Blair manages $62.6 billion in assets. William Blair is based in Chicago with an investment management offi ce in London and service offi ces in Zurich and Sydney.

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