JOHCM Global Opportunities Fund | 10th Anniversary
The global economy is in the throes of regime shift, an inflection point that looks almost certain to be radical, profound and long-lasting. The geopolitical balance of the post-Cold War period is evolving rapidly. Energy is now scarce and expensive, and the road to globalisation is no longer a one-way street.
Inflation could be rising into the double-digits, interest rates are already rising faster than forecast. Quantitative easing, otherwise known as the ‘Fed put’ for the cash that central banks flow into capital markets in times of crisis, is now in reverse.
As might have been expected, the JOHCM Global Opportunities Fund underperformed in 2019—2020 as some US$ 9 trillion in QE flooded into markets from central banks staving off the impact of Covid-19. In an environment of cheap energy, low inflation, extraordinary liquidity and zero-to-negative interest rates, returns, benchmarks and portfolios became dominated by a narrow cohort of super-long-duration growth stocks, particularly big tech and the ‘FAANGs’.
Under the new regime, the tide is running the other way. Capital once again comes with a cost and markets are losing liquidity through ‘quantitative tightening’. Volatility is rising at both extremes, as risks which were allowed to creep into portfolios are now starting to crystallise. Funds and stocks which were top of the pile are now bottom of the heap. We believe this is exactly the sort of environment where the JOHCM Global Opportunities Fund thrives, both in having lower exposure to these risks, and in being able to take advantage of the opportunities which volatility creates by putting capital to work in the likely winners of the next ten years.
Watch the team explain their current market views
Selectivity will be equally important in ‘defensive’ sectors such as consumer staples and healthcare, where it will be important to avoid ‘quality traps'.