“Is the US economy going to bring about the next global recovery? Not too many people would think that. The leading edge is coming from the international (non-US) economies. US credit is as tight as it’s ever been. US consumers are not going to spend their way out. It’s the new world which is supporting global growth.”
Martin Currie’s flagship fund is a concentrated ‘Global Alpha’ fund, which is its first fund launched in Australia since opening an office in Melbourne in June, run by Kimon Kouryialas. “It’s a good time for a global equity specialist to be talking to Australian investors” says Fairweather. “The domestic stock market has done well, but is concentrated in financial and resources stocks. A higher allocation to international equities helps diversify risk and makes investors less vulnerable to the potential impact of a weaker Australian dollar”.
Risk management is an important consideration, and something Martin Currie spends a lot of time on when talking to investors. “To manage a global concentrated fund, it has to be fully integrated on a risk basis” says Fairwether. “We’re constantly monitoring the entire cross correlations between holdings”. Despite the turmoil of recent weeks, Fairweather remains bearish on US financials, because he believes we have not yet seen the “knock-on effect” when consumers start to default on (non-housing) debt. “I’d argue that the US consumer is in a worse position now than in 1990,” he says.
For a concentrated stock picker, though, financials still offer up opportunities, if not in the US. “At Martin Currie we have two experienced global financials specialists in our sector research team. Paul Sloane and Len Riddell have been invaluable in guiding us through one of the most testing periods I can remember. More recently, the continuing volatility has been creating opportunities for us to buy into stocks that are fundamentally sound on very attractive valuations. Despite the problems globally there are still growth financials in Singapore and Hong Kong, a Greek bank we think has good prospects and some nuggets in Brazil” Fairweather says.
Other themes are around selected resources, agriculture and power generation, where Martin Currie’s global sector research helps generates ideas for the portfolio. The firm has been a long-time investor in China, where it opened an office in Shanghai in 1997, run by one of the most experienced China specialists, Chris Ruffle. It has 13 staff, including a team of analysts, and about $US4.5 billion invested. Martin Currie has recently launched the first tranche of a China healthcare fund, which will invest in both listed and pre-IPO health care companies.