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The power of paradigm shifts

Nick Grace
Portfolio manager
Based in:
London office
Investment experience:

NICK GRACE: There is no correlation between GDP growth and equity returns at a country level. And so the reason that I’m invested in China is not [that] I believe China is a great, big country growing at 9–10% growth. That’s not why I’m there. The reason that I’m invested there is I’ve found a few — and I emphasize few — companies where I think our interests are aligned to shareholders’. They have a better widget, a better product, etc., that is in great demand by a growing population base and where the valuation makes sense.

Contrast that in Europe: Some people argue, “Why have you got investments in Europe? The outlook is anemic; you’ve got excess debt.” But again, I stress that there is no correlation between GDP growth and equity return. We’ve identified some fabulous investments that are domiciled in Europe — even, I daresay, in Spain and Italy. One of our larger holdings is a Spanish retailer which just continues to out-execute its peers and has been a phenomenal investment for us over a very extended period of time. Happens to be domiciled in Spain; happens to have a reasonably large business in Spain. But it’s been a great investment, and I think it will continue to be so.

So I tend not to get too obsessed or concerned about “the macro environment” in which the companies reside, as long as they are continuing to execute as we expect.

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