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Megatrends Drive Martin Currie Global Trust

VIDEO: Zehrid Osmani, manager of the Martin Currie Global Portfolio trust, explains why demographics, resources and even vanity are themes to invest in

Holly Black 28 August, 2019 | 12:27AM

 

 

Holly Black: Welcome to the Morningstar series, "Why Should I Invest With You?" I'm Holly Black. With me is Zehrid Osmani. He's manager of the Martin Currie Global Portfolio Trust. Hello.

Zehrid Osmani: Hello.

Black: So, tell us a bit about what the Trust aims to do.

Osmani: Yes. The Trust aims to outperform the market over the long term by investing in companies that have got attractive growth profile, high returns on invested capital, and have got a sustainable business model.

Black: And you do that by investing all over the world? Is there a country that you tend to veer towards?

Osmani: Not necessarily. We'll go where the opportunities are. So, indeed, the remit is global, which gives us the best opportunities to find the best companies we can get attractively valued across the globe to gain the exposure that we want.

Black: And you're quite interested in themes when it comes to investing, aren't you? Why is that?

Osmani: Well, themes is something that we've put in place to understand the portfolio exposures better. And that helps us to then direct the research efforts where we think there might be some attractive themes to research. Once we research them, of course, we need to find value in there. Sometimes some of the themes are overvalued, in which case, we won't touch them. But it will help our direction of research. So, we've put in place a thematic framework, which looks at three mega trends. Those effectively are long-term trends, so multi-decade trends. We've effectively called them demographic change, for one of them; future of technology across the whole economy, or the second one; and resource scarcity for the third one.

Black: Why is demographics an exciting trend do you think?

Osmani: Well, it's exciting in many ways, the obvious one being emerging market middle class, which is a growth driver. But at the same time, in the western world, you've got aging population, and therefore you've got all the aspects of aging, which is increased healthcare spend, increased leisure spend. In the eastern world, or in the emerging markets, you've got increased urbanization as one of them. And there's a few of the themes around demographic change, such as vanity being an important driver, as we know.

Black: Where is vanity a growing trend?

Osmani: Well, vanity is things like spending on luxury, but spending also on cosmetics as one of them. Those are the type of aspects, or your dental spend to make your smile look better for your selfies.

Black: So, you mentioned technology, but you also said you need to find value in your investments. That has been a real popular area. So how do you find value there?

Osmani: Yeah, you're absolutely right. So, the way we look at finding value is we're looking at companies that generate high returns that have got an attractive growth profile over the long term. And when we look at the long term, we look 10 years out. Secondly, we're looking at valuation. But when we look at valuation, we again, value companies with a private equity mentality, so very much long-term valuation analysis, which means that we're able to capture the compounding characteristics of some of these companies that generate high growth, high returns.

And within that whole analysis, of course, we're looking to find companies that have got sustainable business models. And by that we mean high barriers to entry, which of course, in technology, there's always a risk that those barriers to entry erode very rapidly. So, high barriers to entry is important. Assessing disruption risk is an important part of our research work. And that leads to us being able to assess the pricing power of a company. And clearly, for investors, pricing power is very important because that drives returns.

Black: And finally, resource scarcity. Why is that an investment trend?

Osmani: Well, when you think about resource scarcity, you can think about many ways of resource scarcity, the obvious one being natural resources, so water scarcity, food scarcity. In the long term, these very much matter, both for political reasons, but also for social reasons. And there are ways to harness some of these trends. But you can think also about infrastructure as a resource scarcity. And in there, the more natural one to think about is motorways, railways, air traffic, these are infrastructure resources. But then you can also think a bit more laterally. Because when you think about it, financial access is a resource. And there is an element of scarcity of that resource in some areas around the world, some parts of emerging market in particular.

So, there are ways to play some of these very strong trends around access to payments, access to banking services, access to life insurance products. And then, the other part can also be education. Education is also a resource scarcity. So, there are many ways to play resource scarcity. And so, the importance for us in these three mega trends is to make sure that these trends are very diversified so that we are able to look across various sub-themes that we are able to then assess the attraction based on the returns potential that we see in these sub-themes and the growth profile that we see.

Black: Well, thank you so much for your time.

Osmani: You're welcome.

Black: And thanks for joining us.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Martin Currie Global Portfolio Ord289.00 GBX-0.69

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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