Imperium Capital Publication

Global Matters Weekly – 29 March 2021

Fund Selection 101

by Tom Delic

The CEO of a business has many responsibilities, two of the most important being the strategic and operational oversight of the company. Another vitally important aspect of their role is capital allocation, an area that is often underappreciated by an investor but also poorly carried out by many CEOs. When researching a fund, it is often useful to view the fund manager as a CEO of a conglomerate, responsible for making investments in a portfolio of businesses, with none of the strategic and operational pressures, thereby making capital allocation of primary focus. Viewed through this lens, making an investment through a fund is a partnership with the fund manager, who you are entrusting to manage the capital of your clients in the best possible way. Just like the listed equity markets represent a huge variety of businesses that you can choose to own a piece of, a universe of funds represents a list of potential long-term business partnerships. Below is a summary of a growing body of studies that can help form a filter for the universe when picking who you should partner with.

Market Snapshot

  • Global equities rose 0.7% last week
  • The global coronavirus case count continues to rise steadily, with European Commission President von der Leyen announcing that “we’re at the start of the third wave of the pandemic”
  • Brent crude rose 0.1% last week to $64.6 a barrel
  • Gold fell -0.7% to $1732.5 per ounce

Global Matters Weekly – 22 March 2021

Bailey, Powell and Lagarde; the new eco-warriors?

by Robert White, CFA

For all the column inches dedicated to central bank meetings this month, one potentially seismic change to monetary policy has slipped under the radar over the last few weeks. In the most recent UK budget, chancellor Rishi Sunak announced that the Bank of England should reflect the “importance of environmental sustainability”1 in policy decisions, which includes asset purchases. The prospect of central banks determining which assets to support based on environmental credentials points to a significant increase in the importance of environmental, social and governance (ESG) factors for investors, and also raises questions about the appropriate role of central banks going forward.

Market Snapshot

  • Global equities fell -0.4% last week
  • Government bond yields continued to rise around the world
  • Brent crude fell -6.8% to $64.5 a barrel as demand flags in key markets
  • Gold rose by 1% to 1745.2 per ounce.

Viewpoint – February 2021

One year ago coronavirus began to ravage the global economy and stock markets. The ensuing recession was the worst since the Great Depression, yet over those 12 months global equities have returned almost 30%, despite a 35% decline in the initial few weeks of the pandemic. Emergency policy support on an unprecedented scale underpinned markets, more recently turbo-charged by the extraordinary success of the vaccine development and roll-out programme. The narrative has moved to the scale of the economic recovery ahead and its implications for inflation: the reflation trade has been gathering pace and came to dominate markets in February.

Global Matters Weekly – 15 March 2021

Why we are all hard wired to be bad investors

by Gary Moglione

Investing our savings is an extremely important part of life that will have a strong influence on retirement, home ownership and the quality of our lifestyle. Therefore, you would expect us to have evolved to be efficient investors. Unfortunately, we are hard wired to be bad investors as many of our natural instincts force us to fall into a number of behavioural traps that result in poor investment returns. The first one is herd mentality. This becomes more prevalent at points in the cycle when retail investors are highly active as investment tips get passed on in workplaces, pubs and dinner parties. Everybody has heard stories of people getting rich investing in Bitcoin or technology stocks that has made them motivated to get involved. A small number of high-profile stocks have posted stellar returns in recent years. As a result, valuations have been pushed up ever higher. Higher valuations should spark caution when investing but the reverse actually takes place. People talk about their gains to friends and family sparking more interest in a stock. This causes the share price to rise even further detaching it from intrinsic value. We have witnessed this many times before with the ‘nifty fifty’ period in the late 1970’s and the tech boom in the late 90’s. Dare I say we are in a similar environment at the moment.

Market Snapshot

  • Global equities rose 2.9% last week
  • OECD revises up 2021 global growth forecast to 5.6%, an increase of 1.4 percentage points from the OECD’s December forecast
  • Brent crude fell -0.2% last week to $69.2 a barrel
  • Gold rose 1.6% to $1727.1 per ounce.

Global Matters Weekly – 8 March 2021

Percy’s not a pig

by Alex Harvey, CFA

A little over a fortnight ago history was repeated when NASA’s Jet Propulsion Laboratory (JPL) successfully landed a rover on the Martian surface. After a near seven-month journey across 300 million miles of space, at a gentle cruising speed of nearly 25,000mph, the rover touched down on 18th February. Perseverance – or Percy for short – was lowered on to the surface by a sky crane, like its cousin Curiosity in 2012, in a feat of incredible human engineering. Of the now five successful JPL rover landings (yes, five!), this was the most accurate ever and was enabled through the experience gleaned over previous rover missions. [If you want to see the landing in real time from the onboard cameras see the link in the footnote1 . It is remarkable to watch and with probably better resolution than my phone].

Market Snapshot

  • Global equities ended the week relatively flat, returning +0.1%.
  • The US Senate has passed President Biden’s $1.9 trillion Coronavirus stimulus package.
  • Brent crude rose by +4.9% to $69.4 a barrel.
  • Gold fell -1.9% to $1700.6 per ounce.

Global Matters Weekly – 1 March 2021

Are you sitting comfortably?

by Richard Parfect

As I write this there is a good news story of a B777 executing a successful diversion and emergency landing following the dramatic loss of one of its two engines. Somewhat unnervingly for passengers the remnants of the burning engine were clear to see. More seriously there was fuselage damage too, however the pilots’ frequent rehearsed emergency procedures and risk controls prevented a catastrophic outcome. Passenger unease is understandably common on aircraft, particularly if the aircraft enters clear air turbulence. Whilst even significant buffeting is normally well within design limits of the aircraft, passengers can become alarmed that something catastrophic will befall them. However, the best thing passengers can do is sit back, try and relax and trust in the professionalism of the pilots and engineers; the turbulence will pass.

Market Snapshot

  • Global equities fell -2.8% last week
  • 10-year US Treasury yields rose 14.4bps on Thursday in their biggest daily move since March 2020, before falling -11.5bps on Friday. The substantial moves were driven by real rates increasing, rather than higher inflation expectations
  • Brent crude rose 5.1% last week to $66.1 a barrel
  • Gold fell -2.8% to $1734.0 per ounce.