Investment Philosophy
We believe the forces that shape the world are evolving
Demographics:
Demographics are no longer an incremental support for economic growth neither will they constitute the same deflationary influence on labour costs. The previously growing workforce now shrinks. Challenges are increasing, from how to fund healthcare requirements to generational wealth transfer and more.
Security:
The security environment has deteriorated markedly, from cyber security to the risks of companies operating with extended supply chains, to the sharp reversal in the post-Cold War peace dividend.
Environment:
We can no longer treat the world’s natural resources as a free good to be plundered at will. While sustainability is key to our survival as a species, the combination of regulatory demands and societal pressure associated with improving the environmental sustainability of companies will act as a headwind for conventional economic growth.
Technology:
We believe artificial intelligence (AI) heralds a new industrial revolution but its positive impact on productivity and global economic growth will be tempered by the other three macroeconomic forces.
What are the implications?
It is our view that US hegemony will wane against a backdrop of unsustainable Government debt. Broad global equity market returns for the coming decades are likely to disappoint relative to those recorded historically. Government debt will not be a reliable diversifier within multi-asset portfolios. Private capital markets are in a bubble that will likely burst or at least suppress asset returns globally over the long term.
Many of the trends that have persisted in capital markets and the wider investment industry since the global financial crisis will unwind. Active investing will be rewarded. Shorter economic and business cycles will mean smart beta and factor ETFs will struggle. Larger caps will underperform. Capacity in genuinely active investment strategies will be lower.
The investment regime has changed. The Company adopts an agile approach to investing that it believes is key to generating superior real returns over the coming years.
Agile investment philosophy
Flexible:
The flexibility to navigate market, business and economic cycles. The willingness to predict and adapt to change, rather than just react.
Focused:
Unshackled from market indices and with the expertise to focus on specific opportunities rather than broad market exposures. Resolute in our pursuit of superior long term real returns.