THE INVESTOR CENTRE
THE INVESTOR
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T
he US economy should continue to lead
growth in the developed world.At the
same time, Japan and Europe should bene t
from stimulus measures, while China and
emerging economies face slowing growth
and structural challenges. Globally, dividend
stocks trade at attractive valuations relative to
the market and we think global dividends will
grow again this year.We continue to favour
dividend stocks with secular, long-term
growth over defensive bond-proxies, while
maintaining a well-balanced and diversi ed
portfolio. In the UK, economic growth has
been acceptable, but the recovery so far has
been of relatively low quality, stimulated
largely by the housing market; so the
recovery is likely to be a long grind given the
levels of debt that persist.There is, therefore,
still a degree of fragility, but it is encouraging
that the recovery is now beginning to
broaden out as wage increases show signs of
coming through.Also, we would expect the
UK equity market to reverse the
underperformance versus Europe seen in the
run-up to the general election, given its
relatively attractive valuation.Within the UK
equity portfolio, we are focusing on
out-of-favour‘ugly ducklings’ for which there
is clear valuation support and scope for
longer-term improvement. In xed income,
we expect yields to rise over the remainder of
the year, with some volatility likely to be
evident ahead of the rst US rate rise.
COLUMBIA
THREADNEEDLE
INVESTMENTS
Strategic Managed
Wage increases an encouraging sign
that recovery is starting to broaden
Recovery is likely tobe
a longgrindgiven the
levelsof debt
Richard Colwell, Stephen Thornber
and Jim Cielinski
F
rom the Greek debt crisis roiling the
eurozone to a sharp economic slowdown
in China to myriad examples of geopolitical
uncertainty a icting the Middle East and
the European periphery, there is no shortage
of reasons for nancial markets to proceed
cautiously. Despite this, absolute and relative
investment performance has been strong
for an extended period, which suggests a
moderating of return expectations may
be in order. Going forward, we would be
pleased with high single-digit returns.We
do not make predictions on the direction
of the macroeconomy.Whether it is future
interest rates, the outcome of the euro
crisis or the outlook for oil prices, there are
certain things that are unknowable.What is
known is the well-established propensity for
investors to swing fromwild optimism to
extreme pessimism. For this reason, volatility
is sure to return to nancial markets,
which is an outcome that we look forward
to. Historically, periods of volatility have
presented tremendous opportunities for
investors who know the value of a business.
By developing proprietary insights, we are
able to nd good businesses with defendable
barriers to entry, strong management teams
and growth potential in order to earn returns
superior to the market over the long term.
EDGEPOINT
Satellite manager: Global Equity
Investment performance has been
strong, despite market caution
Going forward,we
wouldbehappywith
highsingle-digit returns
Tye Bousada and Geoff MacDonald
A
recent trip to Ghana highlighted to us
the reason why poor countries usually
remain poor.The ruling classes in these
countries deliberately fail to deliver adequate
frameworks to provide development
opportunities for the rest of the population,
resulting in an underclass of people to
exploit.This manifests itself most obviously
in currency weakness and in ation. However,
Ghana does possess a functioning legal system
and scores reasonably well inTransparency
International’s Corruption Perception Index,
ahead of China and India. Broadband now
works in the country and the cost of solar-
generated electricity is about half the price
of diesel, so a large jump in productivity in
the economy is likely.We spend most of our
time thinking about the companies we might
own for clients over the long term.The large
number of potential ethical pitfalls in Ghana
underlines the importance of assessing how
a company might behave when our back
is turned.The clinic at Unilever Ghana’s
headquarters sits outside its largeTema site,
not hidden away inside it. Experience from
other volatile investment environments also
shows us that companies which have strong
brands – like Unilever Ghana – are better
able to protect their shareholders.
FIRST STATE
Global Emerging Markets
Trip to Ghana highlights importance
of seeing potential ethical pitfalls
The ruling classes fail
todeliver adequate
frameworks
Jonathan Asante
