Ken Griffin, seen here, speaks during the Global Financial Leaders' Investment Summit in Hong Kong. Griffin founded Citadel LLC, one of the largest and most successful hedge funds in the world. (Credit: Lam Yik/Bloomberg)
(Bloomberg) — During the 2025 Global Financial Leaders' Investment Summit happening this week in Hong Kong, the world’s top bankers and investors warned of such systemic headwinds as cost pressure in the U.S. insurance sector and President Donald Trump’s immigration crackdown, underscoring an array of concerns even as markets steam ahead.
UBS Group AG Chairman Colm Kelleher starkly cautioned against risks in the U.S. insurance industry, citing weak and complex regulation as private financing booms. Meanwhile, State Street Corp. Chief Executive Officer Ron O’Hanley took aim at U.S. immigration policies, calling them “anti-growth” amid an unprecedented crackdown that has spurred chaos even among skilled foreign workers.
Wall Street heavyweights such as Goldman Sachs Group Inc.’s David Solomon and Morgan Stanley’s Ted Pick both highlighted the possibility of a significant equity market selloff, while also striking a bullish tone on topics such deal-flow and China’s resurgence.
“I think markets tend to be most irrational in their extremes, in the heights of a bull market and in the depth of a bear market, and right now we are very deep into a bull market in many of the major economies around the world,” Citadel founder and CEO Ken Griffin said. “There’s a sense that very little can go wrong.”
The comments were made in a series of wide-ranging discussions at this annual conference designed to showcase Hong Kong’s heft as a financial center and wealth hub.
In the U.S., equity traders have benefited from volatility sparked by Trump’s tariff wars and uncertainty over an economic downturn. Morgan Stanley’s stock traders posted their best third quarter ever, with revenue jumping 35% to $4.12 billion.
“We should also welcome the possibility that there would be 10% to 15% draw-downs that are not driven by some sort of macro-cliff effect,” Pick said, adding that it would be “a healthy development.”
Rising stock markets come as private credit — or lending done outside the heavily regulated banking sector — has ballooned over the past decade to a $1.7 trillion industry. Some banks are making conscious decisions to collaborate with private credit, to earn fees and tap ever-deeper pools of capital; others say the combinations are risky and could infect the banking sector.
U.S. life insurers have ramped up private debt investments over the past few years, allocating close to one-third of their $5.6 trillion in assets to the sector last year, up from 22% a decade ago, according to data compiled by research firm CreditSights. The rapid growth has prompted financial regulators globally to raise alarms, particularly on how it might hit the banking system.
“We’re beginning to see huge rating agency arbitrage in the insurance business,” UBS Chairman Kelleher told his fellow financiers in Hong Kong. “In 2007, subprime was all about rating agency arbitrage. What you see now is a massive growth in small rating agencies ticking the box for compliance of investment,” he said.
Kelleher added that for the insurance sector “there is a looming systemic risk coming through and it’s because of lack of effective regulation.”
The event in Hong Kong was held as China seeks to woo Wall Street’s largest financial institutions after a tumultuous few years. The fourth annual gathering comes as the financial hub’s markets are surging and Chinese companies are flocking to list with stock sales running at a four-year high.
Morgan Stanley’s Pick said the market is again becoming a destination of capital with momentum returning.
“When the animal spirits are kicking in and when there is clear advantage being struck by winning companies, they want alpha,” Pick said. “They want company-specific allocations — that’s when the new-issue environment becomes so important.”
See also:
- Insurance will tell you everything about the U.S. economy
- Business leaders increasingly concerned about political and economic uncertainty
- The homeowners insurance crunch could shake the economy
- Lighter federal regulation means greater risk exposures
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