THE INVESTOR CENTRE
THE INVESTOR
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R
ecent market volatility has meant that
a number of stocks which previously
failed to meet our yield criteria within the
global equity income strategy now meet
our requirements, opening up the
opportunity set from which we could
potentially bene t. Overall, we continue to
expect a low-growth, low-return world
and, while interest rates in the US will rise,
we believe that the interest rate will be
lower than in previous economic cycles.
In that environment, we expect investors
to continue seeking income and our global
‘go anywhere’ approach means that we can
bene t from a broad opportunity set.We
continue to favour global dividend stocks
with attractive growth characteristics but
have been slightly reducing exposure to
economically sensitive stocks in favour of
more defensive holdings.
In the UK, we expect earnings for the
broad market to face ongoing headwinds
from the problems in China.We have been
cautious on China for some time and
expect it to be a source of further
short-term uncertainty. In this
environment, we continue to look for
opportunities among some of the large-
company stocks which have markedly
underperformed the domestically focused
mid- and small-cap names.
COLUMBIA
THREADNEEDLE
INVESTMENTS
Strategic Managed
‘Go anywhere’ approach provides
opportunities for strong returns
Investorswill look for
income ina low-growth
globalmarket
Richard Colwell, Stephen Thornber
and Jim Cielinski
V
olatility returned to nancial markets
in a big way during the quarter as
persistent fears about China weighed on
investor sentiment. In the face of increasing
investor unease, the team added to high-
conviction holdings and continued to strive
to upgrade the quality of the portfolio
by relinquishing businesses where our
thesis has been recognised, and deploying
capital into new ideas. Cash levels have
come down as we have worked to capitalise
on opportunities.
We have long regarded the tumult in
Greece as a sideshow compared to our
primary concern of a slowing economy in
China.Although a hard landing in China
would clearly be negative for nancial
markets, it’s important to distinguish the
risk of nancial market volatility from the
potential for permanent loss of capital.
While we regard the return of volatility as
an opportunity, we have conscientiously
attempted to protect the portfolio in
the event of a slowdown in China, thus
limiting the potential for a permanent
loss of capital.We like to say volatility is
the friend of the investor who knows the
value of a business, and the enemy of the
investor who doesn’t.With this in mind,
we feel the portfolio is well positioned
to take advantage of the opportunities
volatility present while limiting the risks of
a permanent loss of capital.
EDGEPOINT
Satellite manager: Global Equity
Focus is on adding more quality
stocks to the portfolio
Greatervolatility
provides investorswith
moreopportunities
Tye Bousada and Geoff MacDonald
T
here are many misjudgements we could
make on clients’ behalf in the next ve
years, one of which could be an assumption
that governments can control outcomes for
economies and markets.This may well have
been the case in Mao’s China or Stalin’s
Russia, but came at great human cost and
ultimately failed.
We suspect this misjudgement has been
one of the drivers of overly optimistic
valuations of bonds and equities in recent
years, something which is, at last, being
questioned now in emerging markets as
far- ung as Brazil, Malaysia and China. Far
from being a bad thing, this is in fact just
what is required. Even partially free stock
and currency markets can hold political
systems to account for their actions in a way
that forces them to move forward.
The portfolio remains defensive with a
focus on high-quality management teams
and franchises, even if this means paying
a little more.We have less client money
invested in China and Hong Kong today
than we did in 1993.We have no crystal ball
for macroeconomics but we fail to see how
the Chinese economy can continue to grow
at the present rate for much longer.
Elsewhere, some valuations have
improved a little, especially if one considers
weaker currencies.
FIRST STATE
Global Emerging Markets
Portfolio remains defensive with a
focus on well-managed companies
Governments cannot
control economies
andmarkets
Jonathan Asante
