Investing in global markets is necessary for investors to take advantage of the widest range of opportunities that will allow them to experience performance above index-generated returns, an active high-conviction fund manager has said.
SG Hiscock portfolio manager Hamish Tadgell revealed his organisation has identified certain end markets that are currently experiencing above gross domestic product growth and added to truly take advantage of these sectors requires a global outlook.
Further, Tadgell revealed the investment house is focused on companies that allow it take advantage of five mega-trends it has labelled Technology Everywhere, Changing Consumption, Aging Population, Low Carbon Economy and Urbanisation, and that exploring these opportunities cannot be confined to the domestic share market.
“One of the big challenges in Australia and the Australian listed market is that it is quite difficult to find ways to play to these themes,” he noted.
“By way of example, obesity [in the Changing Consumption trend] is an epidemic really and a disease we think is growing phenomenally and we’d love to buy a great insulin company in Australia, but they just don’t exist.”
Tadgell pointed out, however, that there are still ways in which to gain exposure to this trend via the domestic share market, albeit via an indirect route.
“The way we think about it is I guess through a second derivative. We think obesity is very closely linked to sleep apnoea – there is a very high correlation between the two and it’s no surprise that Australia and the US have some of the highest obesity rates and also some of the highest sleep apnoea rates in the world.
“So we’ve got an investment in a company called ResMed, which plays in that space.”
He also revealed the opportunity SG Hiscock has identified stemming from the Chinese government’s push to lower the country’s pollution levels as part of the Low Carbon Economy trend.
Here China is aiming to reduce its reliance on coal-fired power to gas-generated energy.
“Currently in China, 3 per cent of the energy mix is gas and they’re looking to take that to 15 per cent by 2030. They’ve got sufficient indigenous gas to deliver about 50 per cent of that so the balance is going to have to be imported and it’s going to come from one or two places,” Tadgell said.
“It’s either going to come down from Russia through the Trans-Siberian pipeline or it’s going to come in through LNG (liquefied natural gas) imports.
“We think Australia will be a big beneficiary of this, so we’ve got quite a big investment in Woodside at the moment because we think they are going to be a beneficiary.”''