Swan attributes his thinking to monetary policy that has resulted in crowded trades globally. However, with the much-discussed movement towards fiscal policy initiated by certain governments comes new opportunities.
“The way you invest in a world driven by fiscal policy is different and the assets that benefit are those that investors haven’t wanted to own, which are cheap and out of favour,” he says.
“This is where we have seen the opportunities as we have been moving the portfolio back towards value and away from growth and quality.”
Swan’s 23-strong investment team has been taking on more value opportunities for the past 12 to 18 months.
“In January 2016, when markets were collapsing, it was the biggest dispersion ever in the history of Asia in terms of the price people were prepared to pay for safety and quality versus exposure to the cycle, ie value. It was at an incredible extreme,” he says.
“We always have some growth and value in the portfolio but the composition will change through the cycle. If the markets are driven by a fairly singular factor, such as a big value rally, then we should still outperform the market.
“For five years when growth had been slowing down in Asia, around 75% of our opportunities had been in quality/growth, with occasional value stock-specific opportunities.
In the past 12 months, that has inverted. Now, 75% of our time and new allocations are going into value-type investments and 25% in interesting growth stocks.”
