Four key takeaways from the global financial crisis

It was the biggest downturn since WWII…

The financial crisis caused the biggest economic downturn since the Wall Street Crash in 1929, which devastated the US economy. But how big was it really?

Estimates put total write-downs by financial institutions alone at over $2 trillion. Beyond that, lost growth attributed to the crisis and ensuing recession thought to be worth over $10 trillion, equal to a sixth of global GDP in 2008.

The crisis even set records of its own and 2009 was the first year on record when global GDP contracted in real terms.

The effects have been long-lasting…

While the crisis may seem to be in the distant past, many of its effects persist to this day. While interest rates have begun to rise in the US and UK, the European Union is still engaged in quantitative easing, though it hopes to end this in 2018.

Gross debt across advanced economies has also stayed persistently high, at 106 percent of GDP in 2016 compared to only 72 percent in 2007. Unemployment has remained high in many countries around the world with Greek unemployment at 20.8 percent at the end of 2017, while in Spain 16.6 percent of people are still unemployed.

Investors fled to equities, resulting in an unprecedented bull market…

The record low interest rates after the financial crisis (the lowest being 0 percent in the European Union) cash savers have been hit badly with cash losing money in real terms in many bank accounts.

As a result, an increasing amount of capital has fled to the public and private markets in search of returns or even just to try and beat the effects of inflation. The Dow Jones Industrial Average hit its highest ever closing at 26,616.71 on 26 January 2018. This followed an unprecedented bull market throughout 2017 when the Dow Jones set a record for setting records, with 70 record high closes during the year. Other markets globally saw a similar trend, with London’s FTSE100 hitting a record high of 7,877.45 on 22 May 2018 and the German DAX 30 reaching a record high of 13,559.60 on 23 January 2018.

…Private debt has boomed in popularity

Since picking up steam in 2013, the private debt industry has boomed with record fundraising seen in 2017. Total capital raised by private debt funds last year hit $208 billion across 226 funds. While fundraising is expected to slow down in 2018 it is currently on course to beat every year on record except 2017. The number of funds being raised has remained high due to more managers entering the space and investor appetite is showing few signs of slowing down.

Check out our interactive, downloadable presentation on the global financial crisis here.