Why you need to be diversified?
Alex Crooke, Portfolio Manager of The Bankers Investment Trust, talks about the impact of rising input costs (wages and raw materials) on companies, areas where he is finding opportunities and the benefits of global diversification in a volatile market environment.
- Global equity markets have struggled this year, with sentiment largely dominated by concerns over rising inflation and the prospect of faster-than-expected central bank tightening. The war in Ukraine, higher energy prices, and persisting supply chain disruptions have also served as a headwind.
- We are investing cautiously in China and are focusing more on defensive areas such as health care. However, the governments zero-Covid policy remains a risk to the country’s economic growth.
- Companies are using nearshoring to reduce costs and supply chain disruptions. By having certain elements of their manufacturing closer to home, they can reduce transportation costs and have more control over their processes.
- With economies, sectors and businesses are all on different cycles – having a globally diversified portfolio has helped us provide investors with a smoother, less volatile ride as the risk is spread across different regions/sectors.
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Please read the following important information regarding funds related to this article.
- Global portfolios may include some exposure to Emerging Markets, which tend to be less stable than more established markets. These markets can be affected by local political and economic conditions as well as variances in the reliability of trading systems, buying and selling practices and financial reporting standards.
- Where the Company invests in assets that are denominated in currencies other than the base currency, the currency exchange rate movements may cause the value of investments to fall as well as rise.
- This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
- Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
- The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
- Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
- The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.
- Using derivatives exposes the Company to risks different from - and potentially greater than - the risks associated with investing directly in securities. It may therefore result in additional loss, which could be significantly greater than the cost of the derivative.
- All or part of the Company's management fee is taken from its capital. While this allows more income to be paid, it may also restrict capital growth or even result in capital erosion over time.