Ian Warmerdam, Head of Global Equities, believes that investors should avoid trying to predict economic cycles or market sentiment in the second half of 2018 and beyond. Instead Ian and his team believe the focus should be on long-term secular and more predictable trends that offer attractive end markets for companies to grow into.
What have been the key drivers behind global equity market performance so far in 2018?
We believe that the markets in the short to mid-term are largely random in terms of direction and are typically influenced by events we could not hope to predict. We therefore think it would be a mistake for us to get into the game of making these predictions or creating a post event narrative for short-term trends.
More interesting for us has been further evidence that many of the strongly embedded long-term trends that drive many of our portfolio companies remain in place. The digitalisation of the global economy, whether in retailing, advertising, media delivery, payments or gaming, continues at pace. The need for greater investments in energy efficiency and water infrastructure continues to drive global investments. While the ability of strong brands to capture the growth in emerging market consumption is also driving opportunities for well-run companies across diverse areas of the world.
Where are you finding the most attractive opportunities?
We believe that there are a number of long-term societal, demographic and technological secular trends that are providing attractive end markets for certain companies to grow into over time.
In the area of payments we believe that there is a long pathway ahead for the continued move from cash as a payments mechanism towards digital and paperless forms. We believe that the advertising industry will continue to shift away from broadcast TV and print, towards search, social media and online networks. Across the auto supply chain we see that the need for more energy efficiency will create demand for more lightweight materials, greater electrification within the car, and innovation in the drivetrain. We believe that the ever-aging Western demographic will continue to put pressure on fiscal budgets, and drive the need for much more cost-effective solutions across the healthcare supply chain.
It is these long-term trends – and a number of others alongside – that we continue to believe will drive exciting business opportunities that high-quality and well-managed companies can benefit from. When we can invest in these companies at attractive long-term valuations we will do so, and look to generate attractive long-term returns for clients.