Why We Invest According to Global Themes
In a free global marketplace capital tends to flow to sectors where long term growth rates – and hence returns – are more attractive than the average. This capital – whether of a private or public sector sort – bids up prices of assets in these sectors and creates “sustainability” of growth. As investment managers, it’s our role to “allocate capital” (Warren Buffett’s hallmark phrase) to where the best potential returns (and lowest prices and risks) are available. Pricing is important; “overpaying” for assets is always dangerous.
When the facts change, as Keynes said, we’ll change our mind on some of these eight themes, but our best guess is that we may be retired long before we do.
The same theme may be “played” at one stage of the cycle through one fund1, then at another stage through another, depending on the attractions of the specialist sector. Robust long term global themes may remain a powerful way to make money for decades, whilst the funds chosen to “play” them may be – though do not have to be – different at different times.
Although we refer to “funds“ and “managers“ in this paper we may use direct shareholdings if appropriate funds do not exist. These directly held shares will be screened using our proprietary ISN system for their correlation to particular themes and factors to ensure efficient portfolio management.
