Global firms team up for long-term growth

Yasmine Raso

Senior Journalist, Financial Newswire

23 February 2023

Global investment firms, Baillie Gifford, MFS Investment Management and Orbis Investments, have partnered for a series of educational forums to assist investors in creating long-term capital and building portfolios that can withstand economic change and global reform.

The managers said there were several key trends that have forced investors to re-think and revise their investment options and decisions, as major global economic reform continues to have ripple effects on the creation of long-term capital.

Rosemary Shannon, Client Director at Baillie Gifford, said several market tailwinds have signalled either an end or reversal, ranging from “offshoring to onshoring, globalisation to nationalism, minimal capex spending to mandated capex, [and] technology driving revenue not cutting costs”.

“Active management comes in to its own when you consider big shifts in society over the next decade or more and how innovation is supporting long-term change, whether that’s the transition to clean energy, the future of transport or food, or breakthroughs in biology that could cure cancers and disease,” she said.

“Academic research and other sources of intelligence can tell us a lot about what’s changing in the world and where to look for successful companies. It is these opportunities that investors vulnerable to short- term sentiment and market noise can miss out on.”

Jason Ciccolallo, Managing Director at Orbis Australia, said while this “boom-bust cycle” will leave some companies at the bottom of the barrel, it will allow others to “emerge or transform to offer differentiated value, retain pricing power and grow market share”.

“As the cycle matures, these ever-rising asset prices can distort behaviour, leading to undisciplined capital allocation decisions. This has seen some eye wateringly high company valuations in certain sectors that are now reversing, although the valuation dispersion between the expensive and cheap stocks is about as wide as we have seen it,” he said.

“Investing in a more complex landscape will demand an increased focus on fundamentals and the price of an earnings stream. Increased discipline will be particularly critical in a world where central bank stimulus has dried up. Every environment produces opportunities, and the one we’re in today is ripe with possibilities — it’s fertile ground for stockpickers.”

Marian Poirier, Senior Managing Director at MFS Investment Management, also said problems in product labelling and non-standardised definitions have fallen short of holding the industry accountable.

“While ESG objectives won’t become any less important, we think a better term could be ‘stakeholder capital’ because building a more sustainable future for companies and investors needs long-term partners and allies,” she said.

“We believe metrics need to better engage stakeholders such as investee company boards, executives, policy leaders, think tanks, academics, market regulators, legislators and not least clients to support genuine ESG objectives. Each has a stake in the process of change, and, importantly, all have a stake in achieving desired change and the prosperity that comes with it.”