Our thematic investment approach is geared to identifying beneficiaries of disruption and investible changes in the global economy. Most of our themes have been in our portfolios for years, although our focus on particular companies changes as themes evolve.
Today, we have five investment themes that we see as rich hunting grounds for the rare companies that can disrupt the status quo in a way that benefits their shareholders.
Two of our themes, The End of Disinflationary Tailwinds and Opportunities Abound Abroad, relate to what we see as seismic changes in the global economy that we believe will lead to new market leadership in the coming years:
▪ Widespread monetary and fiscal policy shifts from economic austerity or restraint to unabashed stimulus and debt growth, and
▪ Protective trade policies that lead to more redundant and less efficient supply chains.
The End of Disinflationary Tailwinds:After four decades of declining interest rates and ten years of very low inflation, both rates and inflation have returned to long-term norms. While the impact of higher interest rates was initially cushioned in the U.S. by the long-term, fixed-rate debt that many consumers and companies locked-in during the pandemic, we think sustainably higher levels of inflation and interest rates mark a notable shift in the global investment landscape that has not yet been reflected in most investors’ portfolio positioning. ..
Opportunities Abound Abroad: U.S. equity markets have outperformed global equity markets by over 45% since 2004. But recent structural reforms in fiscal, energy, industrial and capital-market policies are taking hold in several non-U.S. geographies, creating exciting investment opportunities. In China and Europe, savings rates stand at 45% and 15% of GDP respectively, versus roughly 4% in the U.S. Both regions are taking steps to stimulate domestic consumption and to expand their domestic technology firms.We believe these policies, coupled with recent and potential future weakness in the U.S. dollar, will lead to better equity performance in certain industries and companies outside the U.S. Given the long stretch of U.S. outperformance, many equity investors are very under-allocated to non-U.S. markets, creating opportunities we can capture.
Our research also continues to uncover attractive new areas for investment across our other themes.
The Rise of Purpose-Built Tech (formerly, Dawn of Heterogeneous Computing): For nearly 50 years, the performance and cost of computing technologies improved exponentially, as Moore’s Law predicted. Now, physical and economic challenges limit such rapid growth. When we launched this theme, our initial focus was on how computational technologies would benefit from specialized, purpose-built solutions, rather than one-size-fits-all approaches. We are now expanding our focus to include companies in adjacent areas, including software and security. We believe firms that generate and leverage bespoke, high-quality proprietary data and technology solutions will displace prior scale-based winners. ..
The Advent of Molecular Medicine:After decades of promise, breakthroughs in genomics have changed the practice of medicine. Genomic sequencing technology, clinical knowledge and data analytics have converged to generate diagnostics and treatments specific to individual patients and diseases. We expect more data-intensive practices will improve medical outcomes and alter which companies in the healthcare ecosystem win or lose. After several years of uncertainty that depressed valuations and equity returns in the broad healthcare sector, we believe companies leading the genomic medical revolution are well positioned for long-term outperformance. ..
Next-Generation Automation: As the global labor force ages and the need for supply-chain redundancies becomes more acute, companies are increasingly seeking ways to do more with fewer people. Automation technologies, previously concentrated in automobile and electronics production, have matured and reached an inflection point. They now offer attractive returns on investment to companies across many industries. ..
Discover a different approach to wealth management.
