**Mark Costar and Vishal Bhatia** \Senior Fund Managers
From a zero cost of capital to higher cost. From easy multiple expansion to risk of compression. Regime shift is here and it has only just started. Markets have been irrational and are now correcting.
In the context of the UK, a clear agenda is emerging. It presents a powerful intersection of structural change. Brexit We can expect increased spending on infrastructure, on rail, roads, renewable energy, waste-to-energy, electric vehicles. Less regulation will release bureaucratically trapped capital. Covid The pandemic accelerated long-term trends toward cloud computing, remote working, digitisation, a re-focus on life priorities, on wellbeing, the environment.
Ukraine The conflict in Ukraine has led to a redistribution in the geopolitical map. It is speeding up deglobalisation, drawing a renewed emphasis on security, in defence, supply-lines, energy.
Where compression is a risk, the starting price is crucial. UK valuations are low to the point of ludicrous. Successful companies trade for less than the value of their tax losses, or for less than their own net free cash. The interest of private equity is telling you that prices are wrong.
For investors in UK equities, the opportunity is there to profit from change.
In the context of the UK, a clear agenda is emerging. It presents a powerful intersection of structural change.
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