Today we are in a world leaning towards protectionism aided and abetted by current geopolitical events and posturing. The world suddenly seems a long way from being connected. This will impact global equity funds.
Does this mean investing in global companies is no longer a valid or a compelling approach? No.
But it means investing in truly global company companies. Companies that conform to the description.
These should be large multi-national companies (MNCs) with no less than 50 per cent of sales or revenues derived from outside the company’s home country.
The investment case for MNC’s are compelling and include: less volatility through a greater ability to survive global, regional, and country economic cycles; strong balance sheets providing the financial flexibility to invest in research and development, brand advertising and marketing; conformity to global environmental, social and governance initiatives; and less political and security risk, given that corporate entities are domiciled in a robust legal jurisdiction.
The first quarter of 2022 is an excellent working example of how quickly the financial market landscape can change.
At such times, it is important to remain steadfast to your investment principles and ensure the companies to whom you entrust capital are truly global and exhibit the characteristics described above.
Mark Clubb is executive chairman of Team Asset Management