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From the Editor

The very real horror of another global financial crisis

Lehman Brothers' New York headquarters
Lehman Brothers’ New York headquarters in June 2008, three months before the firm’s collapse.

In this issue, Pensions & Investments looks back at the decade since the global financial crisis, examining what changed after the collapse of Lehman Brothers Holdings Inc. in September 2008.

Reporters spoke with asset owners, academics, policymakers and asset managers to find the lessons learned. I hope you'll read it.

Watching the effects of central bank policy post-crisis, I fear the trends are pointing us toward the next crisis, while the world has fewer tools with which to fight back.

In the decade since the GFC, stocks have been on a tear, to the benefit of investors.

Many of those same investors also have chased fixed-income returns — above the historic lows of government debt yields — further out on the maturity curve or down the credit spectrum. In both cases, they are adding more risk.

Others have moved into private debt, lending to businesses around the world. Because these new lenders are not banks, they are outside many of the post-crisis measures aimed at preventing a repeat.

As P&I reported earlier this year, assets managed globally in private debt strategies (excluding unfunded commitments) totaled $638 billion as of June 30, 2017, an increase of 211% since year-end 2007.

As we learned in the GFC, poor vetting of borrowers can lead to repayment problems. And in a world where loans again are increasingly repackaged into structured securities and sold to other investors, the dominoes again are lining up for a potential fall.

It is important that investors know the risks because the tools put in place post-crisis to monitor and protect banks' liquidity don't apply to non-bank lenders.

As Lehman learned, there could be little appetite for a government bailout of these lenders. Unfortunately, a painful lesson again could be in the offing.