Sectors

Dmitry Solomakhin, Portfolio Manager global technology equities - August 2011

"It is very likely that the long term economic growth in developed markets is going to be structurally lower going forward, as fiscal budget issues need to be addressed and this is going to require time. I also think however that we are unlikely to see a repeat of the 2008 credit crunch. With that in mind and given that a significant part of the recent sell off is in my view driven by technical factors - de-leveraging, forced selling, etc - I am now adding to the names that I like on a two-three year view that have sold off in the recent correction.

“In technology, specifically investors have been selling out of high beta sectors - semiconductors, small caps, etc - and relatively high multiple midcap stocks and have been trying to ‘hide’ in large cap names. I think this has presented me with a great opportunity to increase my exposure to midcap names that will show an above average growth over the next several years even in a relatively sluggish economic environment.
I have been consistent in my approach of identifying such areas of an above average growth. I tend to focus on good franchises with strong balance sheets. I have also started adding to high quality names that are more cyclical in nature – mostly in the semiconductor and semiconductor equipment space – that have sold off sharply and now offer very compelling risk/reward.

“Finally, my personal view point is now is the time when one should increase exposure to equity markets but be selective and follow the fundamentals. Just go back to 2008 credit crunch and ask yourselves were you buying or were you selling then? If you were buying did it feel comfortable to buy near the trough? It felt awful to me back then, but it was the right thing to do in hindsight."

Nicky Stafford, Portfolio Manager global consumer equities - August 2011

“While clearly recent news headlines about the US credit downgrade, the continuing European sovereign debt crisis and slowing growth indicators haven’t been very encouraging, the sell-off has been pronounced and indiscriminate. We are now seeing companies with great fundamentals (that previously were expensive) trade at compelling valuations. This creates great buying opportunities for stock pickers like us that are willing to look beyond shorter-term uncertainty and focus on the long-term prospects of these franchises. I have been using the sell-off to add such quality franchises. I expect consumption in developed markets to remain relatively subdued and look for structural growth stories, either via store rollouts, new product cycles or new concepts/disruptive technology (e.g. internet retailers). I continue to believe in the long-term growth potential of emerging markets, and have also been buying companies that are well positioned to take advantage of rising consumption and changing lifestyles in these geographies.”

Sotiris Boutsis, Portfolio Manager global financial services equities - August 2011

"The response to the sovereign crisis in Europe has been underwhelming, as politicians cannot agree on the necessary steps (further political integration and issuance of Eurobonds), while the ECB has been too reluctant to step in to compensate for the political vacuum. Similarly, in the US, political processes brought the country close to default and the recent S&P downgrade confirmed what was already known, ie the unsustainability of the current economic trends. The combination of slowing growth and fiscal concerns further constrain the ability of governments to intervene and stabilise the economy, which was key in dealing with the crisis during 2007-2009.

“The sell-off in the markets has been quite indiscriminate and valuations in many cases are out of sync with fundamentals, which is creating opportunities. I have been increasing exposure to high quality geographies, and companies with strong cash flow characteristics, good capital base, and attractive organic growth opportunities, and away from companies that appear cheap, but whose franchise is not going anywhere or even worse is vulnerable. I believe this is the right positioning for the current environment and I will continue to take advantage of valuation anomalies and indiscriminate selling to further position the fund along these lines."

Hilary Natoff, Portfolio Manager global health care equities - August 2011

“It is in periods like this that opportunities to buy great companies with strong fundamental drivers where valuations had not been compelling before present themselves, as we saw in 2008. I am adding to emerging market healthcare - they were the first to come out of the 2008 crisis - to innovators whose products fulfil previously unmet medical needs and will be in demand irrespective of the environment, to companies that help save the healthcare system money (eg generics), to companies that benefit from the aging demographic, as well as to companies with unique products where price cuts are less likely.”

Steve Buller, Portfolio Manager global property securities - August 2011

“Unfortunately, property stocks have been not been immune to the uncertainty and volatility of global financial markets. In addition, there has been no disparity in impact by country or sector type as even more ‘traditional’ defensive property stocks have been hit hard. Comforting, in the short-term property fundamentals and the cost of the capital have not been affected.”

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