What is the fear of some of the biggest investors?

What keeps you up at night?

It’s a question you’d expect to draw a wide range of responses when posed to investors responsible for tens of billions of dollars. After all, it’s not exactly as if there’s a shortage of anxiety-inspiring headlines floating around each day.

More colloquially described as the Fed “unwinding” its balance sheet, the mere prospect of it happening is apparently enough to strike fear in to even the most experienced money manager

Mike Ryan — Chief Investment Strategist for UBS Wealth Management Americas

“One of the things that always keeps up at night is the risk of a policy mistake. “Think about the Federal Reserve, the Bank of England, the European Central Bank, Bank of Japan, what they’ve all engaged in is this extraordinary balance-sheet expansion that commonly has been known as quantitative easing. That’s been extraordinary in terms of helping stabilize markets and allowing the economy to recover.

Dennis Ruhl — Chief Investment Officer of JPMorgan’s US Behavioral Finance Equity Group

“A few a different things. One, of course, there’s the possibility that in the unwind of QE, something huge happens. I think that that’s more likely to stem from another region of the world outside the US — not a huge likelihood, but it worries me.”

Mark Haefele — Global Chief Investment Officer at UBS Wealth Management

“For us, the No. 1 concern is Federal Reserve policy. If they remove too much stimulus too quickly, if they raise rates too fast, that would be a likely cause for the economy to turn down. Basically, it’s this idea that they start to take away the punch bowl.”

David Hunt, President and CEO of PGIM

“There’s no question that we have real policy risk. I mean, never before in the last 30 years have we seen so much of economic activity dependent on, not just the Fed, but I would generalize it to central banks around the world and the very accommodative policies. So there is a lot riding on the fact that they can begin to normalize those policies in an effective way.

Matt McLennan, Head of the Global Value Team at First Eagle Investment Management

“We’ve brought a lot of growth forward through easy policy, and now that the policy environment is tightening with interest rates going up, the Fed talking about shrinking its balance sheet … The policy environment could become trickier at a time of lower expected returns.”

Bill Schultz, Chief Investment Officer at McQueen, Ball & Associates

“It’s going to be the pace of the unwinding that really dictates the concern.  But still, the faster the pace of unwinding and Fed rate hikes, the bigger risk it poses.”

Source: Bloomberg Pro Terminal

Junior Trader Stefan Panteleev