In the final instalment of our analysis of fund selector views on cash rich companies, we ask leading investors which managers they are using to capitalise in this environment.
Grégory Steiner, Gestion Privée Indosuez
The need for companies to preserve their level of cash assets in order to be less sensitive to fiscal pressure is more an issue for advanced economies than for emerging ones.
In the context of lower economic growth, the companies that will ultimately win will be those exposed to so-called ‘visible growth’ in high growth markets such as emerging economies or those benefiting from sustainable competitive advantages like pricing power, monopolistic strategy or powerful brands.
In the developed world equities, the best funds that offer that kind of exposure in the international category are the Morgan Stanley Global Brands and Comgest Monde funds, managed by Peter Wright/William Lock and Céline Piquemal-Prade respectively.
For more geographically focused bets, the Wells Fargo US All Cap Growth fund, Comgest Renaissance Europe, managed by Laurent Dobler, and Fidelity Europe, run by Victoire de Trogoff are our favourite ones.
Santiago Pons Sala, Capital Value
Recently we have noticed many western multinational companies (especially US non-financials) are accumulating important levels of cash and other liquid assets to a level last seen during World War II.
This defensive move goes against any logical opportunity cost analysis but is a natural response from corporations that foresee difficult times.
Evidently this is not a good sign for the economy. Once again we are witnessing how financial resources fail to take part in the real economy, hiding in banks’ balance sheets and in corporations’ current accounts.
The absence of investments is the start of a negative cycle that threatens growth and could take us to another recession.
Nevertheless, private companies are showing signs of good financial health. Corporations have been doing their homework in recent years.
They have reduced costs and improved efficiency, so they are ready to start investing on their own – without increasing their leverage ratios – either to expand their operations or to study the possibility of a corporate acquisition. We have a couple of ways to profit from this trend using investment funds.
Firstly, we focus on companies that could be potential buyers within their sector because of their superior business model, solid balance sheet and high cash assets position (Allianz Euroland Equity Growth or Echiquier Global).
The second approach looks at the other side of the spectrum, selecting companies whose unique characteristics have made them potential targets for M&A operations (Fidelity European Special Situations).
Jean-Charles de le Court, Deltalux
The markets are increasingly rigged to keep the financial system afloat. Our governments, financial elites, financial supervisors, justice departments and mainstream media share the same bed.
But producers of real goods are trying to trade without using the inflated US dollar.
So an independent wealth manager should favour assets that: a) can’t be rigged indefinitely, like physical gold; and b) that aren’t on the radar of high-frequency trading robots – such as shares traded on non-OECD exchanges – and avoid fixed-income. They should also avoid intermediaries and keep in mind that owning an ETF/tracker does not give him property rights on underlying shares.
Nowadays I’d prefer to invest in countries with healthy balance sheets so that they won’t need to overtax their citizens/companies. It’s worth looking more closely at Russia and carefully selected frontier markets.These comments originally appeared as part of the Buyers' Market feature published in the November 2012 edition of Citywire Global.