In today’s economic environment, global investing is even more important than usual.
In an environment that makes it challenging to find great ideas at great prices, I want maximum flexibility. And a global mandate provides the flexibility to search different jurisdictions of the world to find ideas.
I directly manage or co-manage three different funds in three different regions – Canada, the U.S. and global. Of the three, I would say the Trimark Global Small Companies Class is the most attractive offering in our small cap suite. Again, it’s the flexibility to go from one market to the next. And if we believe there is more value in one area of the world than another at a particular point in time, we’re able to focus our efforts there.
We feel very, very good about the dozen or so companies that we’re working on today and the bulk of them are businesses based outside of North America.
As people start to get a little more optimistic about what’s going on in the United States, they continue to be pessimistic about Europe and the fiscal situation over there. In my opinion, there are better ideas right now in Europe than there are in the United States. So it’s nice to be able to focus our time and research in the places where we see opportunity, rather than be bound to one specific region.
A lot of investors today are yield-focused. Right now, the soothing, gentle thing to do is to buy long bonds or REITs, because they give you the income you’re looking for. But, whether it’s six weeks, six months or six years from now, something may well go drastically wrong with that decision, because these investments have been bid up to prices that provide no margin of safety should the economic environment change.
If I were 65 years old, not terribly wealthy and I needed a certain level of regular income, I know I would be heavily invested in equities. I wouldn’t be managing my personal portfolio around yields or looking specifically for companies that pay dividend yields. I would still be looking for great companies with resilient franchises trading at attractive prices.
Yes, many older investors need income. In that case, I would systematically sell a portion of my holdings to cover my needs. That might be painful and you might see that as a risky exercise at 65, but ten years later you’re likely doing a lot better than your friend across the street who threw all of his money into REITs, pipelines or long bonds.
If you can endure a little bit of pain and a little bit of short-term potential underperformance, you’re getting equities at a time when I think they’re likely to give you a much better risk/reward than things like bonds.
It’s the same with global investing right now. I believe it pays to do the unorthodox thing.