update
Investment Clock Update:
Synchronised Global Recovery Trevor Greetham’s Investment Clock is a way of relating the economic cycle to asset and sector rotation.
The Investment Clock model that guides our asset allocation decisions is in the equity-friendly ‘Recovery’ phase. As long as infla-
Current Asset Allocation Positioning Underweight
Neutral
Overweight
Equities Property Commodities Bonds Cash
Moving towards equities.
tion pressures remain absent, central banks don’t even have to think about tightening policy. We expect rising commodity prices to push us into ‘Overheat’ phase at some point in 2013, but central banks are unlikely to tighten policy at the first sign of inflation. Investor sentiment is very positive leaving the markets vulnerable to negative shocks. However, with economic data improving and monetary policy set to remain loose, the risk/reward picture is skewed to the upside. Our multi-asset funds are overweight stocks, property and commodities and underweight bonds. •
LEAD INDICATORS Inflation • Spare capacity is ample, commodity prices have lagged stocks and economists are generally downgrading their CPI forecasts. • So far, our global inflation scorecard continues to point downwards.
The Investment Clock model is in disinflationary ‘Recovery’.
Growth • Our global growth scorecard turned positive in December for the first time since June 2012. • The Recovery phase of the global economic cycle sees growth pick up with monetary policy remaining loose .
Bertrand Puiffe assumed responsibility for the Fidelity Funds Nordic Fund in August 2011. He has now fully completed the task of transitioning the fund to his own unconstrained investment style and has a year of strong performance under his belt. From a macroeconomic perspective, why should investors be interested in the Nordics? “The Nordics are extremely attractive both in terms of credit rating and the strength of public finances. These countries target a government surplus as part of their constitution, allowing governments the flexibility to help struggling companies should the need arise. It is hardly surprising then, that long-term GDP growth in Norway, Finland and Sweden is anticipated to be above the Eurozone average. In terms of fiscal and monetary policy, the picture is similarly encouraging, with the ability to implement interest rates cuts an attractive feature for investors. Low corporate tax rates, too, provide a very real boost to companies.” What are the benefits of your approach? “My approach is an unconstrained one. I seek to invest in Nordic companies based on their own merits rather than their size in the benchmark index. The long-term investment approach that I adopt aims to capture market inefficiencies that have resulted from the short term focus of other investors in the market.”
And within the portfolio? “I hold around 40–50 stocks, with a bias to midand small-caps. I adhere to a Bertrand systematic stock rating process to Puiffe identify the best ideas. At the moment, mid-caps look particularly compelling in valuation terms. I have a disciplined approach to risk management focusing on absolute risk, both at a stock level and during the portfolio construction process.” Can you give some examples of your approach in action? “Autoliv, the developer, manufacturer and supplier of automotive safety systems, is one example. The company’s revenue growth is driven by emerging markets, particularly China. In terms of pricing power, the firm currently enjoys around forty percent of the market share in the seatbelt and airbag industries. Barriers to entry are relatively high for potential rivals, although new players are entering the active safety market. In addition to this, the company has a very strong management team.” “The Norwegian media conglomerate, Schibsted also looks attractive at the moment. The company is a strong player in newspapers and print magazines and is rapidly, and very successfully, expanding in online classifieds beyond the Nordic markets. Indeed, in terms of overall online visitor numbers they are only beaten by Google and Facebook in many markets.” •
Ease of doing business. Nordic countries lead the way
CUSTOMER FOCUS As part of Fidelity’s mission to always act in the best interest of its clients, the company will launch a customer feedback program to better and fully understand client perception of their interaction with Fidelity. The in principle question to address is: Would you recommend Fidelity? “The program provides a system-
THE NORDIC COUNTRIES: ONE GREAT OPPORTUNITY
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atic approach to gather and communicate customer feedback and to measure satisfaction improvement going forward. It will help us understand what our customers want and how we can better fulfil their needs, says Petter Edwinson, Head of Marketing & Communications.” The program will be rolled out during the spring across Europe. •
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Ease of doing business ranks economies from 1 to 185, with first place being the best. A high ranking (a low numerical rank) means that the regulatory environment is conducive to business operation. The index averages the country’s percentile rankings on 10 topics covered in the World Bank’s Doing Business. The ranking on each topic is the simple average of the percentile rankings on its component indicators. Source: The World Economic Forum. Annual report (2012) on Global Competitiveness. The chart represents only a selection of the countries in the survey.
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