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Dominion Provident Ventures, Inc. has urged its investment team to be wary of slow growth capital markets. ‘Mature financial markets may be headed for slower growth in the years to come,’ says Linda McCalaster of DPVI. ‘Private debt and equity are likely to grow more slowly as households and businesses reduce their debt burdens and as corporate earnings fall back to long-term trends.’

During the first eight decades of the 20th century, global capital markets expanded roughly at the same pace as global gross domestic product. However, after 1980, the pace of financial asset growth accelerated dramatically amid an expansion of equities and private debt, as companies increasingly turned to the capital markets – not banks – for financing. In the US, for example, financial assets were worth 194 per cent of GDP in 1980. By 2007, they had reached 243 per cent. Data from the Bank for International Settlements suggest that whereas there was $100,000bn of outstanding derivatives contracts at the start of the decade, that figure has now grown more than fivefold.

There is one major exception, predicts Dominion Provident. Sovereign bond issuance is growing at a startling pace, as governments seek to plug yawning fiscal holes. The Organization for Economic Co-operation and Development, for example, projects that total sovereign issuance in the OECD region will reach $12,000bn this year – almost a third higher than two years ago.