##alibrating the dynamic between the centre and the states that is critical for reforms to take root. bis central bankers ’ speeches reverting to mean or different this time? the weak and uneven global recovery post - crisis has raised concerns about the pace of future economic growth and what it means for returns on investments. despite ultraaccommodative monetary policy, most advanced economies have not attained so - called escape velocity. • the legacies of the financial crisis – in the form of debt overhangs – continue to exert a drag. • the structural deficiencies in the major economies, such as under - investment, cast a dark cloud on future potential growth. but one thing that ultra - low interest rates over the past six years have clearly done is to depress returns, particularly in fixed income assets. • us bond returns since 2009 has averaged 2. 3 % p. a. compared to returns of 5. 8 % p. a. over the past 20 years. this has contributed to a more challenging investing environment for government funds – namely pension funds, sovereign wealth funds, and central banks – many of which have significant allocations to developed market fixed income instruments. mean reversion is a key tenet of investment theory – the expectation is that as interest rates normalise, returns should revert to pre - crisis levels. but the cliche that this time is different could well be true. secular trends weigh on future economic growth, and consequently the real return on investment. drivers of future economic growth what are the prospects for future economic growth? there are, in my view, four key drivers of long - term growth : deleveraging, demographics, productivity, and energy. let me elaborate on each of them. first, deleveraging. global balance sheets need to undergo significant adjustments. this is a structural issue that will take time to address. • for about 20 years preceding the global financial crisis, there had been a significant build - up of debt in the advanced economies. • this period – often called the great moderation – could just as well have been called the great leveraging. household debt grew rapidly in the us and europe after 2000, driven by low interest rates and compression in risk spreads. it has come down a little since the crisis, more so in the us than in europe, but has still some way to go in both economies. but what little private sector deleveraging has occurred has been offset by public sector releveraging. in

markets are superior to advanced economies, it seems to make sense to increase the strategic allocation to these markets, beyond what is dictated by market capitalisation. the challenge is in finding ways to translate the superior growth performance of emerging market economies into asset returns, given the limited depth of their capital markets. one way is to perhaps invest in advanced economy corporates with significant exposure and presence in emerging markets. • market research shows that equity investments in certain advanced economy companies with significant emerging market exposure can indeed enhance portfolio performance. local presence to serve global interests even so, there is no substitute for direct investment in emerging market assets. but to understand the performance and risk characteristics of each market requires access to specialist knowledge of political systems, macroeconomic trends, currency conditions, and regulatory and legal frameworks in these countries. singapore offers a compelling value proposition for government funds seeking a vantage point from which to build knowledge, insights, and partnerships in emerging asia. as a premier asset management centre, singapore offers global funds a gateway to investing in asia. asset managers are drawn to singapore ’ s strong global and regional links and their growing presence reinforces these links and at the same time enhances the larger financial ecosystem of banks, insurance companies, and the supporting networks of legal, accounting, and technological expertise. the growth in assets under management has in turn helped to draw in more sell - side products, including traditional and alternative assets like real estate and private equity, as well as a wide range of capabilities. several government funds have set up offices in singapore to support their research and investments in asia. they include : • icprc ; • norges bank investment management ; • the swiss national bank ; and • la caisse de depot et placement du quebec. conclusion managing money for the long - term is one of the most difficult of human endeavours. for those of us who manage government funds, we also owe a duty of care and responsibility to future generations – to sustain decent returns at an acceptable level of risk in an era of subpar growth. bis central bankers ’ speeches a wise man once said, “ in investing money, the amount of interest you want should depend on whether you want to eat well or sleep well. ” i wish you fruitful discussions over the next two days as you explore how to do both. thank you. bis central bankers ’ speeches