The end of US exceptionalism
Mark Hawtin and Peter Oppenheimer
Mark Hawtin, Head of the Global Equities team, outlined why a century-high mix of concentration, profitability and valuations could herald an era of poorer returns from US equity indexes and passive strategies, and the essential role of active management in diversifying to maximise risk-adjusted returns.
Investing in the S&P 500 index now carries a high degree of stock-specific and thematic risk. Looking at the S&P’s largest companies going back to 1950, only seven companies have been able to hold a top three position for five consecutive years or more.
Peter Oppenheimer (Chief Global Equity Strategist, Goldman Sachs) explored the drivers of US outperformance over the last 15 years, highlighting the role of the technology sector in fuelling earnings growth in the period since the global financial crisis. While Peter doesn’t yet see an AI bubble, with the tech sector able to fund huge capital investments from cash flow, he does expect spillover impacts and valuation anomalies.
To illustrate the compelling opportunities outside of AI, Peter showed that European banks have in fact outperformed the US mega cap tech sector in recent years.
Panel - The future of active management with Fund Managers
Samantha Gleave, Peter Michaelis and John Husselbee (hosted by Simon Hildrey)
Simon Hildrey, Chief Marketing Officer, hosted a panel discussion on the consequences of passive investment growth and rising market concentration, market valuations, the impact of AI, and the future of active management.
Samantha Gleave, Co-Head of the Cashflow Solution team, gave an insight to their Market Regime Indicators, which show inexpensive European valuations, a technical uptrend, low investor anxiety and a supportive style environment for momentum and, increasingly, quality growth.
Peter Michaelis, Head of the Sustainable Investment team, highlighted the tremendous investment opportunities following a tough period for high-quality growth stocks. His team’s portfolios are trading at a p/e discount of over 20% to their five-year averages but offering growth rates which are double the MSCI World average.
John Husselbee, Head of Multi-Asset team, spoke about the imperative to diversify amid a backdrop of huge concentration risk, and how he is balancing the benefits of passive and active within portfolios, stressing Europe and Japan as markets in which he sees dispersion and alpha generation potential.
Panel - India: the world’s fastest growing major economy
Ewan Thompson and Jon Harrison (hosted by Vanessa Sinclair)
A panel hosted by Vanessa Sinclair, Fund Manager, Global Equities team, highlighted the diversification potential offered by India, the world’s fastest growing major economy, which accounts for only 2% of global indices.
While Indian equities trade at a modest premium to other emerging markets, this reflects the market’s high growth prospects, which are consistent and structural rather than cyclical, and supported by idiosyncratic thematic drivers.
Ewan Thompson, Fund Manager, Global Equities team, described India as an island of diversification. Its correlation with global markets has fallen from around 1 during the global financial crisis to 0.4 now, the lowest among world markets, while its sector concentration score is the lowest in emerging markets.
Jon Harrison, Emerging Markets Macro Strategist, TS Lombard emphasised that of the five largest emerging markets – China, India, South Korea, Taiwan and Brazil – India stands out as offering idiosyncratic growth which is independent of China, US tech cycle or commodities.
Edinburgh Investment Trust
Imran Sattar
There has been a lot of discussion of US exceptionalism recently, but Imran Sattar – Portfolio Manager of the Edinburgh Investment Trust – thinks the UK market opportunity to find attractive businesses with long-duration growth prospects is being significantly underestimated.
The UK stock market has a high degree of international diversification in terms of profits, and the UK is an innovation engine which has produced the second-largest number of ‘unicorns’ (66) globally over the last eight years, behind only the US. Yet the UK market’s valuation is at a significant discount to other global equity markets.
This is providing fertile conditions for Imran to meet the Edinburgh Investment Trust’s dual objectives of exceeding the total return on the FTSE All-Share Index and growing dividends faster than UK inflation. Imran believes the investment opportunity on the UK market is among the best he has seen in his 28-year career.
Sustainable Bond investing: Delivering quality income
Aitken Ross and Jack Willis
Aitken Ross and Jack Willis, fund managers in the Sustainable Investment Fixed Income team, discussed the drivers of income in bond markets and why an active approach is vital.
The Sustainable Investment team hold around 70 positions in the Liontrust Sustainable Future Monthly Income Bond Fund, around three to four times fewer than the average fund in the corporate bond sector. This level of conviction in their active approach is underpinned by the pursuit of sustainable lenders making the world healthier, safer and more resilient and which will therefore have more stable cash flows over time.
Drivers of income from bond markets
Donald Phillips
Donald Phillips discussed why he thinks high yield bonds are an overlooked asset class, offering evergreen total return prospects, with resilient, compounding income.
He believes more investors should own high yield for the long term, rather than “renting” it to target short-term capital gains, and illustrates how – over longer periods – the impact of price volatility and credit defaults are overwhelmed by the positive effect of income compounding.
The Outlook for UK mid and smaller companies and a CEO perspective
Victoria Stevens and Andrew Denton
The Economic Advantage team believe in the importance of ‘skin in the game’ for the small companies they invest in. These companies are created and maintained by talented entrepreneurs, and equity ownership is key in motivating them, aligning interests with shareholders, and fostering an ‘owner-manager’ culture with a conservative attitude towards acquisitions and gearing
In a live episode of the team’s Stock Exchanges series of podcasts with owner-managers, Victoria Stevens sat down with Andrew Denton, Chief Executive Officer, Alfa Financial Software to discuss key insights from his career. Andrew joined Alfa 30 years ago as employee number 15 and has been instrumental in the business’s growth to a FTSE 250 company with a workforce of over 500. Alongside the Chairman, he owns over half of the business.
The change of the guards - the winners of the next decade
Storm Uru & Clare Pleydell-Bouverie
Storm Uru and Clare Pleydell-Bouverie, co-heads of the Liontrust Global Innovation team, discussed how 2025 marks the start of the changing of the guard, as the competitive landscape is reshuffled in the AI era. They believe that today’s incumbents won’t be the companies we talk about in 10 years’ time, a view reflected in the rapid build-out of AI infrastructure, a market projected to reach $400 billion by 2030.
Compute constraints, not overcapacity, define this early-stage buildout. Nvidia's new Blackwell systems deliver 15x returns compared to previous generation GPUs, driving unprecedented capital investment. Traditional hyperscalers like Amazon, Microsoft and Google are losing ground to purpose-built AI cloud providers. Oracle and CoreWeave are capturing disproportionate share of AI workloads despite smaller overall cloud market positions, delivering infrastructure that's cheaper and significantly faster.
Storm and Clare also looked at the next wave of physical AI robotics, where value is migrating from hardware to software and compute, with over 6 million robots expected to be deployed globally by 2035.
