30 September 2021
OFFSHORE SUPPLEMENT
Focus on quality companies that can weather shortterm inflationary pressures
Thematic investing can better position portfolios for the future BY KENNY RABSON CEO, Discovery Invest
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n this changing world, trends are emerging that are set to transform investment markets globally. Four ‘megatrends’ are widely recognised as macroeconomic forces that will fundamentally shape the world going forward. In so doing, they are set to have a profound influence on how we address some of society’s biggest challenges and they will create immense opportunity. The South African equity market, which represents less than 1% of the global equity market, does not offer much exposure to these global megatrends, so the new Discovery Global Megatrends Fund is an option for unlocking these opportunities and for providing diversification in portfolios. Discovery Invest recently partnered with Goldman Sachs Asset Management to introduce a new investment opportunity, giving access to a range of thematic equity portfolios designed to give exposure to global megatrends. Goldman Sachs Asset Management is a global leader in the thematic investing space, with over 20 years of experience and a strong management track record.
“Trends are emerging that are set to transform investment markets globally” The Discovery Global Megatrends Fund is available on both Discovery Invest’s local and global platforms. The Fund provides clients with unique exposure to these four global megatrends by allocating investments equally in four Goldman Sachs Asset Management equity portfolios, each aligned to one of these
megatrends. The four megatrends are: • Technological advancement: Increased connectivity and data are enabling machine-driven insights that will transform how we operate. With younger generations’ increasing comfort in using technology, new business models and opportunities will emerge. The artificial intelligence market will grow to a $190bn industry by 2025, as MarketsandMarkets™ analysis shows. • Environmental sustainability: The urgent threats of climate change and damage to the environment leave global economies with no choice but to turn to green alternatives for energy, food and transport. There is an urgent need for green alternatives – the United Nations predicts a 40% shortfall of available global water supply by 2030. • Future of healthcare: Genomics and precision medicine are set to revolutionise healthcare. With continued innovation in gene mapping and sequencing, paired with the decreasing cost of doing so, personalised treatments with improved outcomes are becoming the way forward. • New-age consumer: Millennials have become the world’s most powerful consumer force. With 2.3 billion people, millennials are the largest consumer cohort. As they enter their prime earning years and increase their spending, they will drive a new age of consumption. Millennials are creating a potential long-term, secular growth opportunity for investors.
18 www.moneymarketing.co.za
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n the second half of 2021, a range of economic factors are front of mind for investors and asset managers alike. Most important, perhaps, are the shorter-term inflationary pressures we are currently facing, and the longer-term macroeconomic challenges that underpin the search for a global recovery from the pandemic. At Marriott, our key focus is to identify companies that are well suited to the long term, and that can effectively deal with shorter-term inflationary pressures. It is no surprise that recent inflation numbers, such as the 5.4% headline CPI in the USA, have been elevated. Base effects, global shipping challenges, manufacturing bottlenecks and unprecedented economic stimulus are all contributing towards higher inflationary numbers. In order to effectively combat input cost inflation, companies must be able to utilise pricing power to maintain their margins. Although inflation and the reopening of economies have been areas of focus for market commentators, we must still consider the underlying global macroeconomic conditions. In 2020, global debt climbed to an all-time high: approaching $300tn. Further, it has become evident that the pace of economic recovery is very uneven across the globe. China’s economy managed to surpass pre-pandemic levels during 2020, and the US economy is expected to do so in the near future, if it hasn’t already. The UK, however, is only due to recover to pre-pandemic levels in the middle of 2022, and many other countries may not recover until 2023 or beyond. The elevated debt levels and uneven global recovery are likely to weigh on global growth. Should investors be worried? It depends on the type of companies they are invested in. Proctor & Gamble, for example, a company held in our international equity portfolios, has an excellent track record of growing dividends even through market and economic turmoil – as demonstrated in the graph below. They have increased dividends 65 years in a row, including a 10% increase earlier this year (compared to a double-digit decline globally). BY SCOTT COOPER Investment Professional, Marriott
Aside from an excellent track record, the company boasts a strong balance sheet, is diversified across countries and product lines, and holds market-leading positions resulting in powerful brand loyalty and pricing power. Last year, Proctor & Gamble was able to grow its organic revenue and core earnings per share by 6% and 11% respectively despite the pandemic and, looking forward, has already announced price increases for key product lines later in the 2021 calendar year. At Marriott, we believe there are a range of companies that are well suited to the long term and which can effectively deal with short-term inflationary pressures. Companies of this nature tend to be less volatile and more resilient, meaning that outcomes for investors are more predictable. Our international equity portfolios contain many such companies. These portfolios can be accessed via: • Marriott’s offshore share portfolio (International Investment Portfolio) • Marriott’s international unit trusts (using your annual individual offshore allowance of R11m) • Marriott’s local feeder funds, which invest directly into our international unit trust funds (rand-denominated).
