In this episode, Peter Lampert, lead portfolio manager of the International Equity Strategy, discusses the recent Chinese stimulus and its effects on emerging markets. He highlights key long-term risks in China, including weak sentiment, regulatory challenges, and geopolitical tensions, while emphasizing the potential of companies like Tencent and Tencent Music. The conversation also covers Turkey's Bim, a discount retailer thriving amid economic uncertainty. Peter explains how the portfolio's success stems from stock selection, especially with stealth performers like Vietnam’s FPT and Taiwan’s IGS, and the importance of balancing macro risks with company-specific growth potential.

Key Takeaways:

•China's recent stimulus signals a shift from restrictive policies to boosting economic growth, leveraging the U.S. Fed's easing cycle to inject liquidity and stabilize the economy.

•The stimulus could mitigate three key challenges: weak consumer sentiment, regulatory uncertainty, and geopolitical risks. While long-term issues persist, the focus on growth reduces the likelihood of worst-case scenarios in the near term.

•Macro factors and bottom-up analysis are deeply intertwined in portfolio decisions. As risks shift, so do portfolio positions.

•Higher macro risks in China lead to applying higher discount rates and requiring better ROI. Growth projections for economically sensitive companies are adjusted lower due to structural challenges, leading to exits when valuations no longer meet the stricter risk criteria.

•Companies with independent growth drivers can perform well despite China's economic challenges, as they are less reliant on the broader economy and can thrive even in a weaker market environment.

•One example is Tencent, whose strong management, dominant WeChat position, and conservative monetization approach offer growth opportunities. Despite China's economic challenges, Tencent can pull monetization levers, making its valuation attractive amid broader pessimism.

•This year’s strong performance of the emerging markets portfolio has been driven by careful stock selection, focusing on lesser-known "stealth performers" like FPT, IGS, and Aegis Logistics, which consistently generate shareholder value.

•Peter highlighted one such performer: Bim, a Turkish discount retailer. Bim has thrived despite economic challenges. With Turkey's economic outlook improving, Bim is positioned for long-term success as it continues to offer value to consumers.

Host: Rob Campbell, CFA, Mawer Institutional Portfolio Manager

Guest: Peter Lampert, CFA, Mawer Portfolio Manager

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore.

Visit Mawer at https://www.mawer.com

Follow us on social:

LinkedIn -

https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/

In this episode, Steven Visscher, lead manager of the balanced strategies, discusses the impact of rising interest rates and inflation on the balanced portfolio in recent years, Mawer’s disciplined and collaborative approach to portfolio construction, and the importance of having a long-term perspective. He spoke about recent changes and additions to the balanced portfolio and provided an update on the performance of the balanced portfolio thus far in 2024.

Key Takeaways:

• Over the last four years, interest rates and inflation have had the most significant impact on the capital markets and the performance of the balanced strategies.
• Following a surge of inflation in 2022, central banks aggressively hiked rates, which led to the first meaningful loss in a balanced strategy since 2008.
• After being called into question in 2022, 60/40 portfolios bounced back in 2023 and 2024 following positive fixed income returns, helping support the overall balanced strategy.
• So far, the market recovery has been led by a narrow subset of businesses, most notably technology companies that are part of the euphoria around artificial intelligence (AI). These companies have experienced extraordinary returns and lifted benchmarks to new heights.
• However, some of the Mawer balanced strategies weren't heavily exposed to those industries and have continued to trail their benchmarks on a relative basis.
• Steven and his team think in a probabilistic way meaning that they are intellectually open to the fact that there are many scenarios that could unfold, and they want to have a certain amount of resilience regardless of the scenario.
• The neutral stance of the balanced portfolio reflects the uncertainty of the current environment. The team’s base case scenario is that a recession may unfold over the next six to 12 months.
• A small portion of capital from the U.S. equity strategy, which is more heavily biased toward larger U.S. businesses, has been shifted to a fairly new asset class, the U.S. mid-cap segment due to a valuation gap.
• From a balanced perspective, the goal isn't to eliminate risk; it's to manage it.

Host: Andrew Johnson, CFA, Mawer Institutional Portfolio Manager
Guest: Steven Visscher, CFA, Mawer Portfolio Manager

For more details and full transcript visit: https://mawer.com/the-art-of-boring/podcast

This episode is available for download anywhere you get your podcasts.

Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com. Follow us on social:

LinkedIn - https://www.linkedin.com/company/mawer-investment-management/

Instagram - https://www.instagram.com/mawerinvestmentmanagement/