By Annabel Brodie-Smith
Well there’s not long to wait – in just one day the pubs and restaurants will be open. Although Leicester is back in lockdown and we are all too aware that we are not free of coronavirus yet. Perhaps, most importantly for my family, the hairdressers will finally be up and running. My youngest son can’t see out from under his fringe, my eldest has a crocked fringe after he decided to take the scissors into his own hands and my husband has a classic 1970s footballers’ mullet.
On this theme we have a release covering managers' views on the prospects for pubs, shops and leisure activities post lockdown. It’s clearly not business as usual but many companies are adapting to the challenges of coronavirus quickly. After over 100 days of lockdown in the kitchen or by the barbecue, my husband and I can’t wait to go out to dinner and experience freedom from clearing up! You’ll have noticed I didn’t even mention my own hair above as you can see it in all its glory on the video…This week I have been talking to three fund managers who are all fans of smaller companies and have a wealth of experience. Hugh Young will have been managing Aberdeen Standard Asia Focus for 25 years in October this year and he spoke to us from Singapore. Francesco Conte will have been managing JPMorgan European Smaller Companies for over 21 years and Gervais Williams has managed Diverse Income Trust since its launch in 2011 and has been managing investment companies for a long time before then. I would really encourage you to watch the video on the next page which looks at the impact of coronavirus, what Hugh, Francesco and Gervais have been buying, their concerns and their outlook. The managers are all very realistic about the tough times ahead but it’s encouraging to hear about the opportunities they have been finding. From Hugh finding technology companies to Francesco’s online pharmacy, they have been busy investing throughout the pandemic and they all think there’s a very strong case for buying smaller companies. Also look at the release which includes views on Japan and the US as well as the UK, Europe and Asia. Interestingly, Gervais thinks it’s smaller companies that will be the star performers of the UK market in the future. This is because he believes the dominant trend of globalisation is retreating, with Brexit and the US-China trade wars reflecting this, and coronavirus contributing to our increasing isolation from the rest of the world. He thinks this will mean we are going back to a more difficult environment, similar to the 1980s when he started his career, where it’s harder for managers to make money as stock markets and assets will not all go up in value. Active managers will therefore have to work harder in this environment and he thinks they will invest in smaller companies that usually perform better over the longterm.
Investment company managers discuss the effect of COVID-19 on the regions in which they invest.
And perhaps if globalisation of trade is receding, it will have an impact on inflation as globalisation has been an important factor keeping inflation down for a while. We look at managers’ views on whether we are heading for an inflationary or deflationary environment. They all agree that the risk is disinflationary in the short term as the pandemic will cause rising unemployment and low levels of consumer spending but views are divided after this. Peter Spiller, manager of Capital Gearing believes: “Once the crisis abates public debt will be at levels not seen since the Second World War. The solution to such problems will be the same now as then: financial repression, a prolonged period of low interest rates and elevated inflation.” Finally, our much-respected investment expert Ian Cowie describes how: “Investment companies bring the world within reach". It’s fascinating to hear about his globally diversified portfolio of investment companies. Some are defined by geography such as JPMorgan US Smaller Companies or Henderson Far East Income while other are focused on commercial sectors such as International Biotechnology or Polar Capital Technology. I found his holding in Aberdeen Standard European Logistics particularly interesting in the current situation where we are working from home and spending more money shopping online. As Ian explains: “Everything we order online has to be stored somewhere before it is delivered to our door, boosting demand for Aberdeen Standard European Logistics’ warehouses and distribution hubs across continental Europe.”
Compass is having a summer break in August but will be back in September. Our summer holiday plans are not surprisingly uncertain but I’m hoping the sun shines, the barbecue sizzles and we can go swimming in the river.
I’d like to wish you all a healthy and enjoyable summer.
See you in September.
Annabel Brodie-Smith Communications Director, AIC
