Ken Griffin, the founder of the giant hedge fund company Citadel LLC, has a keen sense when it comes to forecasting how emerging markets are going to perform. Griffin started Citadel in 1990. Mr. Griffin has been knocked around financially through the years, but he managed to keep the company intact even though the 2008 recession almost destroyed the company. Griffin learned a lot while he rebuilt his hedge fund investments with his limited partners. He made some risky moves in terms of asset management, but they paid off and the company became a giant within four years. Today, Citadel and Griffin are on top of the hedge fund world with billions of assets under management, and an alternative asset management plan that is considered the best in the business.
The BRICS countries have been keeping hedge fund managers up at night this year because of their economic issues. China, the leader of the five-nation alliance, which includes Brazil, India, South Africa and Russia is stumbling economically, and no one is sure if the country will ever be the same economic powerhouse. China’s stock market lost 45 percent of its value this year, and China manufacturing is having a hard time keeping the production lines full. The Chinese government has pumped billions into the economy in order to kick-start the market and their manufacturing capabilities, but Ken Griffin says China’s solutions haven’t worked so far. Mr. Griffin thinks China has lost its extraordinary economic swagger, and that is hurting investors that have billions invested in BRICS markets. If China is not buying goods from other countries that have a partnership with them, those countries suffer economically. Brazil is a good example of that.
Mr. Griffin says the world doesn’t know what’s going on in China at the moment, and the not knowing is not good for investors. Griffin also thinks that China has given some of its economic power to the United States, because of the co-dependency that exists between the two nations. China needs America more than ever now if the country wants to bring its export business back to where it was.
The issue, according to Griffin is, China is trying to transform itself from a nation that makes cheap goods for other countries to a domestic-driven economy. The Chinese have a growing middle class that is able to purchase more Chinese goods than ever before, but many of them want to buy imports too. That’s basically called a “middle-income trap” that many developing nations experience when they reach a certain point in time, according to Mr. Griffin. The Chinese will get their capitalistic act together, and investors will reap the rewards of their actions, but Griffin says the once great Chinese economic swagger will never be the same.