| MONACO, June 19
MONACO, June 19 The global financial crisis has
barely started and is likely to last for at least another 15 to
20 years as major economies cut debt levels, according to Jamil
Baz, one of Europe's most prominent hedge fund managers.
Baz, chief investment strategist at GLG Partners, told the
GAIM 2012 conference in Monaco that total debt levels in a
number of major economies had actually risen since 2007 and had
much further to fall before reaching "a semblance of
"This crisis has not even started. It will take an extremely
long time to reach its peak velocity, and by a long time I mean
at least 15-20 years," Baz, who co-manages GLG's Atlas Macro
fund, told delegates on Tuesday.
"The economic impact of this crisis will be devastating," he
added. "Risky assets will look very ugly as a result."
His comments come as indebted countries in Europe and
elsewhere battle to cut spending and boost growth to try and
reduce debt and convince investors to continue buying their
On Tuesday Spain was forced to pay a euro era record price
to sell short-term debt on Tuesday.
Greece, meanwhile, has been brought back from the brink of
default by Sunday's parliamentary election that has cleared the
way for a renegotiation of the terms of its bailout package.
Baz said that total debt to GDP in G7 countries as well as
Spain, Portugal, Ireland and Greece had risen over the past five
years from 380 percent to 420 percent.
To get to debt to GDP levels below 200 percent, at a rate of
deleveraging of 10 percent a year, there will be "at least 20
years of deleveraging, assuming countries can do it diligently
year in, year out, at great risk to their political and social
stability", he said.
Baz was at odds with the thinking of many fund managers by
saying that equities look expensive compared with bonds.
He estimates that the implied equity risk premium - the
extra return the stock market must provide over the return on
government bonds to compensate for market risk - was likely to
be less than 3 percent, below current consensus.
"This means, believe it or not, that equities are still
expensive (relative) to bonds."
However, he said that corporate debt was being priced far
more cheaply in bond markets than in equity markets.
"This is as close as you can come to macro arbitrage," he
said. "Corporate debt is by far cheaper than equities."
GLG is part of Man Group, Europe's largest hedge
For a Factbox on the European Hedge Fund Industry: