Volatility is coming, says GSFM

GSFM Tribeca Investment Partners munro partners Grant Samuel Funds Management volatility

27 July 2018
| By Oksana Patron |
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Volatility is expected to make a comeback, with the global economic outlook looking uncertain and stock selection being key to outperforming, according to Grant Samuel Funds Management (GSFM).

Among the biggest clouds over the global economy were the trade wars which would be detrimental to the global growth, along with rising interest rates and increasing inflation risk in the US.

Another risk would come from the oil market disruption, as Iran threatened to block the Hormuz Strait, causing a real threat to global economic prosperity, the firm said.

According to Simon Ho, chief investment officer at Triple3 Partners, given these circumstances the withdrawal from the equity market would still not be a solution for investors.

“Withdrawing from equity markets is not the answer, as over the long run they tend to do well,” he said.

“Instead, with volatility looming, investors should position their portfolios to protect against a market downturn. For instance, using options over the VIX can help mitigate portfolio losses when equity markets fall.”

Munro Partners, a global equity absolute return manager with a focus on growth equities, noted that there were still several sectors that would “show promise”.

“We have identified several areas of interest, where we expect to see market growth,” Munro’s chief investment executive, Nick Griffin, said.

“The top five are digital enterprise, internet disruption, digital payments, e-commerce and emerging consumer, and our holding in these sectors ranges from six to 12 per cent.

“With digital continuing to take share from traditional advertising, network effects are such that the advertising spending flows to the dominant digital platforms, such as Facebook and Google. And with digital channels making up only 22 per cent of global ad budgets, there is still room to grow.”

At the same time, the Australian market was predicted to be impacted by global developments, particularly with the housing cycle reaching its peak and with further efforts to rein in “aggressive mortgage lending”.

This would be further magnified by a renewed focus on responsible standards coming out of the Royal Commission and the market has already started to see weakness in house prices.

As far as portfolio positioning was concerned, Tribeca Investment Partners said that it had moved further underweight quality growth sectors.

“Domestically, we are positioned towards metals and new energy materials over bulk commodities within the resources sector and we are positioned more defensively in gaming and select industrials,” Tribeca portfolio manager, Sean Fenton said.

“We have increased the underweight to building materials, property developers and retail as the housing cycle rolls over.

“Globally, we are comfortable with the US growth profile and maintain overweight positions to US cyclicals and the cyclical recovery in Europe.”

 

 

 

 

 

 

 

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