Ninety One (formerly known as Investec Asset Management) Global Franchise Feeder Fund has a long track record (25 years), managed by veteran portfolio manager Clyde Rossouw, focused on investing in global quality companies. The fund seeks to invest in world leading companies with strong competitive advantages, superior margins and focuses on capital re-investment, with a high-conviction portfolio of 25–40 stocks of primarily investment grade companies, with high customer loyalty, strong brands and no debt. It is an equity-only fund adjusting exposure to maximise downside protection and participate meaningfully in rising market. This fund is also part of the managed portfolios developed by Morningstar for our clients. Through us you access the institutional fee class with lower fees.
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By Global investment strategist at Ninety One, Michael Power In a recent column in the Financial Times, historian Yuval Harari made the observation that emergencies ‘fast-forward historical processes’. The Covid-19 pandemic, he said, is doing exactly this. Rapid changes are taking place across all aspects of society. Countries, economies and people have been so disrupted that nothing is constant. ‘I think there is no normal any longer,’ said Michael Power, global investment strategist at Ninety One. ‘We are in such a fluid environment that there is nothing very much we can take for granted any more.’ Perhaps what is most profound about this, is how time frames are being condensed. ‘I’m not sure what long term is any longer,’ said Power. ‘Things that I thought were going to happen for instance by 2030 I think in many instances are going to happen by 2025, and even before. There is a concertinaing of many things at the moment, and the reality is that “long term” is something that is affecting portfolios now. ‘There are huge changes taking place across vast areas of business, politics and geography, and we have to get to grips with that.’ This is an acute challenge for asset allocators. They need to be extremely cognisant of their future allocations, because the future may be closer than they realise. Power emphasised two major trends that should be shaping decision-making. The first is that the shift of economic power to the east may now happen more quickly than previously thought; and the second is that the eurozone, and potentially the European Union itself, are increasingly fragile. Chinese wealth ‘We are fast-forwarding this process by which the west is going to see the centre of gravity move to the east,’ said Power. ‘I think that is going to happen in the next five years rather than the next 10. My prediction is that by 2023 China will be a larger economy in absolute terms than the US.’ This shift has been sped up by the massive economic impacts of the coronavirus. While every country has been affected, China is likely to revive itself more quickly for a significant reason. ‘What’s driving the admittedly muted recovery in China is the Chinese consumer,’ said Power. Consumers in the west will struggle to support the recovery of their own economies to the same extent. And this disparity is going to grow more pronounced. ‘What is going to happen in the next five years is that China is going to discover its 1.4 billion consumers, and they are going to become the drivers of the Chinese economy,’ said Power. This will happen at the same time that China is starting to match, and in many cases lead, the development of global technologies. ‘We’ve seen it start to happen with Huawei in cell phones, and it’s probably going to happen in things like aircraft,’ said Power. ‘The Chinese are going to start to move up the technology chain.’ Asset allocators need to consider what this means for their portfolios, particularly because this transition won’t be smooth. ‘In this process of change, there will be capital that will start to leave the west and move to the east, but it will do so quite hesitantly,’ said Power. ‘Some of it will go to a stepping stone between these two worlds, and that stepping stone looks like gold. ‘I think we have to watch this trend,’ he said. ‘Start understanding the opportunities to invest your capital beyond the old world, because the new world is going to come into focus much more quickly.’ European cracks The second major disruption that may be accelerated by the Covid-19 crisis is a serious challenge to the sustainability of the eurozone. ‘In the next five years I think the euro is in danger and possible the European Union itself,’ said Power. ‘That threat is going to come from the south.’ The southern European states are falling further behind their northern peers in economic terms and are increasingly reliant on financial support to sustain their viability within the European Union. Their vulnerability may become even more starkly apparent in just the next few months of summer. ‘Southern Europe earns well over 50% of its GDP from the tourism season,’ said Power. ‘It’s like having a single crop, and their crop is going to fail this year. They are going to get no income from tourism. ‘That is going to cause huge problems, not only for Italy, but Spain, and Greece and Portugal. Many of the issues that are facing the European Union are going to become very front-and-centre in the next four months.’ This may well lead to another country deciding to split away from the Union. ‘In the next five years its distinctly possible that we will see a second exit from the European Union, and that is probably going to be Italy,’ said Power. ‘Even before this, there were cracks evident, but those cracks are now gaping chasms.’ Source: Ninety One |
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January 2025
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