In today’s uncertain macroeconomic environment, global asset manager Capital Group is focusing on identifying ‘Global Champions’ across sectors and regions to position client portfolios for long-term success.
Speaking at a recent investment press event in Luxembourg, senior leaders at Capital Group, which has some 2,700 billion dollars under management, emphasized the firm’s distinctive investment approach and long-term perspective as key advantages in the current climate.
“We are not investing in regions or sectors, we are investing in companies,” said Patrice Collette, an equity portfolio manager at Capital Group. “Our goal is to find the Global Champions of today and tomorrow that can navigate changing market dynamics.”
The firm’s ‘Capital System’ utilizes teams of experienced portfolio managers, each overseeing a portion of the fund, to foster collaboration while maintaining individual accountability. This approach, the company says, reduces cognitive biases and short-term thinking that can plague star manager-led funds.
New Perspective fund
Christophe Braun, an equity investment director, pointed to the firm’s flagship New Perspective fund, domiciled in Luxembourg with 15.2 billion euro invested, as an example of this long-term mindset. Launched over 50 years ago, the global equity strategy has outperformed its benchmark by 3 percent annually, net of fees.
“We don’t just chase the latest investment trends,” Braun explained. “We look for companies that can stand the test of time, regardless of the macroeconomic environment.”
One such company is Taiwan Semiconductor Manufacturing Company (TSMC), which Capital Group has held in its portfolios since 1999. As the world’s largest contract chipmaker, TSMC is poised to benefit from the global semiconductor shortage and the ongoing digital transformation.
“TSMC is a perfect example of a Global Champion,” said Collette. “They have maintained their technological edge and diversified their revenue streams over decades, making them resilient to industry cycles.”
Similarly, the firm has long-held positions in industrial giants like France’s Schneider Electric andSwiss engineering heavyweight ABB, which are adapting to the energy transition and industrial renaissance through innovation and geographic diversification. Capital Group also has listed planemaker Airbus and aerospace and defence firm Safran in France, building group Sika in Switzerland and Swedish lock maker Assa Abloy.
These companies are like “US assets, packed in European paper,” Colette said.
“These are the types of companies we want to own,” he added. “They may not be the flashiest names, but they have the vision and execution to succeed in an uncertain world.”
Fixed income
Flavio Carpenzano, the firm’s fixed income investment director, emphasized that the fixed income market also offers opportunities for long-term investors, with yields at attractive levels on both a nominal and real basis.
“The key is to look beyond short-term volatility and focus on the predictability of returns. High-quality corporate bonds and select emerging market debt can provide both income and diversification in a multi-asset portfolio,” he said.
“Inflation is down but not out,” added Braun. “We should get used to inflation being higher for longer again.”
At the event, Braun referred to a concept known as the “Benjamin Button effect” when describing the trajectory of the U.S. economy. Drawing a parallel to the movie “The Curious Case of Benjamin Button,” where the main character is born as an elderly person and grows younger over his lifetime, Braun explained that the U.S. economy is essentially moving backwards through the economic cycle.
US economy goes back to the future
Source: Capital Group
Rather than progressing through the typical early, mid and late cycle phases before entering a recession, Braun said the U.S. economy is skipping the late cycle and recession phases altogether. Instead, he believes the economy is reverting back to a mid-cycle stage, where profit margins remain attractive, employment is strong, and credit demand is picking up. This “Benjamin Button effect” means the U.S. is avoiding a hard landing, soft landing or recession altogether, which Braun sees as a positive for the broader global economy in the near-term.
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