Steve Weeple, Senior Investment Director, Equities (USA), Standard Life Investments
Portfolio Manager of the Standard Life Global Equity Fund
Canada is a nation of keen travelers. According to Statistics Canada, Canadians collectively make over 800,000 trips abroad every month. But when it comes to investment portfolios, Canadians have historically been reluctant to let their money travel outside of The True North. It’s hardly surprising that they feel more comfortable investing domestically. Beyond an underlying patriotism, there’s a sense of knowing the companies better. They speak the same language, share the same culture, and have a greater understanding of what’s driving the markets. But what can you do when your clients’ home country-bias has been standing in the way of their returns? Comprising a little over 4% of the world’s capital markets, Canada is not only restrictive in size but also in scope. An individual who invests solely in S&P/TSX Composite stocks will quickly realize that resource companies make up about 50% of his portfolio, with financials counting for an extra third. As we move towards what experts consider to be a sustainable global recovery, now may be a good time for Canadian clients to branch out and diversify. It could be time to encourage your clients to look beyond our borders, and travel the world with their money.
It’s hard to argue with the Bulls
You’d be forgiven for finding it difficult to shake an unsettling sense of déjà-vu. Prevailing market conditions have prompted ongoing low interest rates around the world, and the ubiquitous “slow but steady” growth. However, unlike just a couple of years ago, the underlying fundamentals speak out strongly in favour of a sustainable recovery. In terms of consumer spending, housing and business confidence, the figures call for optimism. In the U.S. we’ve begun to benefit from less fiscal drag than last year, and we’re seeing improved corporate earnings. On the other side of the pond, we saw the Eurozone region stabilize towards the end of last year, and industrial production improve. So now could be the time to help your clients gain exposure to the U.S. and international recovery. But how can you be sure that your portfolio manager is able to find the right opportunities to complement the Canadian market?
A global team; a common language
Our global portfolios are constructed on the premise that the world of investments is constantly changing. As portfolio managers, we seek to identify unrecognized fundamental changes at the company-specific level. This means relying on detailed research on individual companies. It also means carrying out countless face to face meetings with firms around the world. In order to implement a global strategy like this you need to be big. Standard Life Investments has a team of over 400 investment professionals working as the “eyes and ears on the ground” around the world. But even more importantly, to do this well, you need to be joined up. Daily conference calls among our equities teams mean our investment professionals share knowledge and work as a team. Each investment professional seeks to answer the same five questions when researching a company: What are the key drivers in the market? What is changing in the environment? What expectations are already priced in? Why will the market change its mind about these expectations? What is the trigger? By using a common language, our portfolio managers in Boston communicate seamlessly with their coworkers in London, Tokyo and around the world.
Finding the growth opportunities
As bottom up stock pickers, our teams around the world are our most valuable asset. Heading up the investment decisions are our investment professionals who are closely monitoring the 4,500 companies which make up our investable universe of stocks. For a stock picker, this is a privileged place to start. Through in-depth analysis, our teams work together to choose a “Winners List” of the best 20 ideas from among an exceptionally wide range of industries and regions. We have first-hand access to the management process of some of the world’s largest firms, and also their competitors, giving us a 360 degree perspective on the opportunities we’re considering.
So as we continue on a road of what we believe could be sustainable growth, for investors looking to expand outside Canada’s borders, our preferred way is through a rigorous bottom-up stock selection process. If your clients’ portfolios are in need of diversification and lack access to global opportunities now could be a good time to ensure that they travel with their money. For more information on Standard Life Mutual Funds and their range of global products, visit www.advisor.ca/globalexpertise
This article represents the views of Standard Life Investments