Chris Ford, Head of Growth Equities
After a year to forget for both bond and equity investors, investors’ attentions will inevitably turn to 2023. We aren’t macro experts, and consequently we leave the big macro calls and insights to others, but there are some key trends that we can discern already.
The first is that the layoffs we have seen recently in the technology space are unlikely to be done – from where we are sat, the outlook in IT services (and particularly software) is not rosy. Some technology companies (such as Google) are holding out in terms of making large layoffs, but we wonder how much longer that can continue. A recession will feel alien to a lot of technology businesses because many of them have only ever known growth.
The second is that the equity market has turned more positive on some of the early cyclicals – admittedly, there has been a lot of pain seen here in 2022, but expectations have been reset and the market has gained some confidence that the revised levels of guidance could be met in 2023. At any rate, early cycle bellwethers in, for example, the semiconductor space (such as Advantest) are no longer trading anywhere near trough valuation multiples.
The third is that the relationship between the US and China continues to deteriorate, with Activision Blizzard severing ties with NetEase. This is just another example of the West abandoning its commercial links to China; practically it means that popular franchises such as World of Warcraft will not be playable in the country. Increasingly we expect China to forge its own (separate) path in years to come, even if that means duplicating technology manufacturing systems (e.g. in microchips) that already exist and work at a global level. The fourth is that monetary policy operates with a lag and as a result 2023 might be a challenging one as far as the ‘real’ economy is concerned; inflation should begin to roll over (thanks to the anniversary effects) but for consumers and businesses there will be the chastening experience of having to re-finance debt at materially higher ‘risk-free’ rates. However, a tough year for the ‘real’ economy doesn’t preclude a better year for stocks if markets begin to think earnings expectations have re-set to more realistic levels and the bulk of the Fed’s tightening is out of the way. Those expecting a rapid reduction in US rates may be disappointed, but clearly the Fed will tread more softly in 2023 than it did in 2022.
For AI as a theme, we remain highly constructive on the short-, medium- and long-term outlook. We have always regarded AI as a transformational investment theme and, even with the turmoil in markets this year, there has been nothing we have seen in 2022 that has led us to question the durability or relevance of AI. More and more companies are engaging with AI and we are rapidly approaching the point where the vast majority company management teams will have a basic responsibility to consider the impact of AI and automation in order to be regarded as responsible and credible custodians of their shareholders’ capital.
We also continue to think that the world faces profound economic, social and environmental challenges, and that waiting for significant changes in human nature to alleviate some of the worst problems is perhaps unrealistic – climate change conferences like COP27 have been long on rhetoric but short on delivery and it is clear to us that time is beginning to run out. Like DeepMind’s co-founder Demis Hassabis, we think it makes sense to focus on the quantum leap that can be provided by AI, rather than waiting for exponential improvements in human behaviour that in reality may never transpire, even with politicians’ best efforts.
Lastly, AI continues to make inroads in the most unexpected areas – humans have been the only art creators on Earth for tens of thousands of years, but AI art produced by the likes of Stable Diffusion and DALL-E 2 has started to change the parameters of what is possible in the art world. If you have ever wanted a picture of a slightly depressed cat in a mountain landscape in the style of JMW Turner, there is an AI out there that can cater for your needs: Incoherent, creepy and gorgeous: we asked six leading artists to make work using AI - and here are the results.
Important information
This document is marketing material.
The Fund may invest in shares of companies listed on stock exchanges in the United Kingdom, and outside the United Kingdom, exchange rate fluctuations may cause the value of investments to go down as well as up. Investing in companies based in emerging markets may involve additional risks due to greater political, economic, regulatory risks, among other factors.
The value of this portfolio is subject to fluctuation and past performance is not necessarily a guide to future performance. The performance is calculated for the portfolio and the actual individual investor performance will differ as a result of initial fees, the actual investment date, the date of reinvestment and dividend withholding tax. All terms exclude costs. Fluctuations or movements in exchange rates may cause the value of underlying investments to go up or down. Do remember that the value of participatory interests or the investment and the income generated from them may go down as well as up and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Therefore, the Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The Manager has the right to close any Portfolios to new investors to manage them more efficiently in accordance with their mandates. Collective Investment Schemes are traded at ruling prices and can engage in borrowing and scrip lending. Collective Investment Schemes (CIS) are generally medium to long term investments. A schedule of fees and charges and maximum commissions is available on request free of charge from the Manager, the Investment Manager or at www.sanlam.co.uk. A full summary of investor rights can also be found online at www.sanlam.com/ireland/Documents/SAMI%20Shareholder%20Engagement%20Policy.pdf. Documents are provided in English.
This document is marketing material. Issued and approved by Sanlam Investments which is authorised and regulated by the Financial Conduct Authority (FRN 459237), having its registered office at 24 Monument Street, London, EC3R 8AJ. The UCITS Management Company has the right to terminate the arrangements made for the marketing of funds in accordance with the UCITS Directive.
The Fund is a sub-fund of the MLC Global Multi Strategy UCITS Funds plc, a company incorporated with limited liability as an open-ended umbrella investment company with variable capital and segregated liability between sub-funds under the laws of Ireland and authorised by the Central Bank. The Fund is managed by Sanlam Asset Management (Ireland) Limited, Beech House, Beech Hill Road, Dublin 4, Ireland, Tel + 353 1 205 3510, Fax + 353 1 205 3521 which is authorised by the Central Bank of Ireland, as a UCITS Management Company and Alternative Investment Fund Manager, and is licensed as a Financial Service Provider in terms of Section 8 of the South African FAIS Act of 2002. Sanlam Asset Management is a registered business name of Sanlam Asset Management (Ireland) Limited. Sanlam Asset Management (Ireland) has appointed Sanlam Investments UK Ltd as Investment Manager to this Fund.
This document is provided to give an indication of the investment and does not constitute an offer/invitation to sell or buy any securities in any fund managed by us nor a solicitation to purchase securities in any company or investment product. It does not form part of any contract for the sale or purchase of any investment. The information contained in this document is for guidance only and does not constitute financial advice as contemplated in terms of the South African Financial Advisory and Intermediary Services Act.
The fund price is calculated on a net asset value basis, which is the total value of all assets in the portfolio including any income and expense accruals. Trail commission and incentives may be paid and are for the account of the manager. Performance figures quoted are from Sanlam and are shown net of fees. Performance figures for periods longer than 12 months are annualized. NAV to NAV figures are used. Calculations are based on a lump sum investment.
Please note that all Sanlam Funds carry some degree of risks which may have an adverse effect on the future value of your investment. Any offering is made only pursuant to the relevant offering document, together with the current financial statements of the relevant fund, and the relevant subscription/application forms, all of which must be read in their entirety together with the MLC Global Multi Strategy UCITS Funds plc prospectus, the Fund supplement, the MDD and the KIID. All these documents explain different types of specific risks associated with the investment portfolio of each of our products and are available free of charge from the Manager or at www.sanlam.ie. No offer to purchase securities will be made or accepted prior to receipt by the offeree of these documents, and the completion of all appropriate documentation. Use or rely on this information at your own risk. Independent professional financial advice should always be sought before making an investment decision as not all investments are suitable for all investors.
This document contains information intended only for the person to whom it is addressed or presented (Investment Professionals, defined as Eligible Counterparties or Professional Clients), and is intended for evaluation purposes, with no licence to use the content or materials within. It must not be distributed to general public, or relied upon by Retail Investors.
The opinions are those of the author at the time of publication and are subject to change, without notice, at any time due to changes in market or economic conditions. Whilst care has been taken in compiling the content of this document, neither Sanlam nor any other person makes any guarantee, representation or warranty, express or implied as to its accuracy, completeness or fairness of the information and opinions contained in this document, which has been prepared in good faith, and to the fullest extent permissible under UK law. Some parts/sections of this document may been compiled from external sources. Whilst these sources are believed to be reliable, the information has not been independently verified and is subject to material amendment, revision and updating, therefore no representation is made as to its accuracy or completeness. No reliance may be placed for any purpose whatsoever on the information, representations or opinions contained in this document nor shall it or any part of it form the basis of or act as an inducement to enter into any contract for any securities, and to the fullest extent permissible under UK law no liability is accepted or any such information, representations or opinions. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes.
Statements in this document that reflect projections or expectations of future financial or economic performance of a strategy, or of markets in general, and statements of any Sanlam strategies’ plans and objectives for future operations are forward-looking statements. Actual results or events may differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statement. Important factors that could result in such differences, in addition to the other factors noted with forward-looking statements, include general economic conditions such as inflation, recession and interest rates, political or business conditions or in the tax or regulatory framework in the UK or other relevant jurisdictions, any of which could cause actual results to vary materially from the future results implied in such forward-looking statements. No assurance can be given as to the future results that will be achieved. All of the information herein should be treated as confidential material with no less care than that afforded to the addressee's own confidential material of the most sensitive nature.
Sanlam funds mentioned in this document are only available for sale in certain jurisdictions. For the avoidance of doubt, this document is not intended to promote these Funds to any person in any jurisdiction where such promotion is not permitted under applicable laws and regulations. Potential investors should inform themselves of the applicable laws and regulations of the countries of their citizenship, residence or domicile and which might be relevant to any type of transaction in shares/units of our Funds. By accepting the terms of this disclaimer, you expressly acknowledge that you are, as the case may be, an investor who is legally or otherwise duly authorised to seek information about our Funds.
“Deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.” (Notes 1, 3 and 4)