In your view, what are some of the ways the Covid-19 pandemic has changed the global business landscape?
One sector that comes to mind is online retail. The biggest focus in that space has been around low price, large selection, and convenience – but that can leave many merchants out of luck. It can be difficult for some merchants to compete in a dynamic where their products might be positioned as loss leaders, or considered second priority when it comes to logistics. By contrast, we’ve seen other online retail platforms extend capital to their merchant base during the crisis – in some cases helping businesses that weren’t online previously to begin generating revenue there. This is an example where I think people will remember how certain companies behaved during the crisis, when businesses really needed them.
From trade wars to threats of stock exchange delistings, there’s been no shortage of risks and controversies related to US-China relations. Yet investment opportunities also abound in China. What excites you about this market?
China is a very immature market in many ways, but the business models we’re coming across there are just unbelievable. For example, there are large-scale biologic drug manufacturers helping to enable the growth of the Chinese biotech industry. The industry is in its early lifecycle, but companies are building scale and moving up the value chain. We see this across a whole spectrum of different industries, including semiconductors. There’s an understanding in China that semiconductors are of strategic importance and that outsourced producers of certain required materials may not be reliable long-term. Our research process helps to reveal opportunities like these that help make China super exciting.
Jon Tringale: One thing I would add about China in general is we’re not investing in a China index, or China as a country. We’re looking for traditional growth companies that are growing their moats in parts of the market we think have long-term tailwinds. We don’t look to participate in huge legacy telecom companies, big banks, or state-owned entities. We’re picking off select opportunities.
There has been increasing investor interest in ESG and sustainable investing. How do you consider issues of sustainability?
Mike Trigg: Jon’s right. We didn’t wake up one day and decide to conform to ESG standards. Our emphasis on a company’s culture has existed since day one – it just turns out that it’s actually very relevant to an ESG framework. I think we’re much further along than many managers when it comes to the topic of ESG. We look at a company’s materiality as it relates to issues such as gender diversity. When a company can actually practice what they preach, those practices can become a competitive advantage. So, in the same way we think about moat trajectory, we really try to find companies where there’s a positive trajectory around ESG.
Moving forward, how do you think about companies in terms of “Covid winners” and “Covid losers”?
Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore the universe of investments may be limited and investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. This could have a negative impact on an investor’s overall performance depending on whether such investments are in or out of favor.
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