Quality

How a Quality approach can provide resilience

A focus on resilient companies can offer investors protection during periods of drawdown and participation in rising markets; the key is to achieve a balanced exposure to various pockets of growth. Our panel from across the world touch on some key discussion points in the current investment climate.

Dec 7, 2020

1 minute

Clyde Rossouw
Simon Brazier
Charlie Dutton
A focus on resilient companies can offer investors protection during periods of drawdown and participation in rising markets; the key is to achieve a balanced exposure to various pockets of growth. Our panel from across the world touch on some key discussion points in the current investment climate.

Key takeaways

  • The market is underappreciating the risk of a no-deal Brexit with COVID-19 and the US election dominating the news agenda until recently; it is important to be careful with UK currency exposure in portfolios.
  • The recent Ant IPO being pulled serves as a reminder that China is still an emerging market. Longer-term, the outcome should be positive as this regulation around micro-loans should reduce credit risk. It’s also better to happen before the IPO than after, when Ant’s share price would have fallen 25%-30% and really hurt investor sentiment.
  • Global portfolios can also access the China opportunity indirectly, through companies that operate there. It’s an attractive structural growth opportunity.
  • The FAANG stocks have created a very narrow market that investors are keen to rotate out of; these companies also face increasing regulatory risks.
  • The art of constructing a portfolio that offers resilience in both good times and bad is having that balance. While crowded trades can cause relative underperformance, it is when the rotations occur that this additional balance comes to bear.
  • In the UK, there is little direct technology but it’s clear that tech is affecting business models much faster than in the past; it is important to focus on businesses that can handle geopolitical stress, economic uncertainty and structural change.
  • US political gridlock is not necessarily a bad thing from a market perspective; no significant policy changes are likely to be enforced, which means markets can now focus on the shape of recovery.

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Specific risks

Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company.

General risks

All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.

Authored by

Clyde Rossouw
Co-Head of Quality
Simon Brazier
Portfolio Manager
Charlie Dutton
Portfolio Manager

Important Information

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