Introduction - Angles & Perspectives Q2 2024

Introduction - Angles & Perspectives Q2 2024

At PSG Asset Management, we firmly believe that the independent thinking and thorough research that underpin our 3M investment process, provide us with a unique vantage point from which to identify investment opportunities for our clients.

This edition showcases the breadth and depth of our independent thinking – from questioning the nature of safe-haven assets, to thinking differently about how commodities are likely to behave in the future and what role they might fulfil in client portfolios. Lastly, we show how thinking about event risk probabilistically helps us to position portfolios with protection in mind. By questioning the popular narratives that often dominate markets, we are able to find the overlooked gems that others are ignoring – perhaps because they reside in unpopular areas, or are just deeply out of favour. And in the process, by looking beyond what is popular, we deliver valuable diversification benefits to our clients.

In the first article, Head of Research Kevin Cousins explains that economies and financial markets are built on a foundation of trust. Without it, markets become inefficient and governments lose credibility. Nowhere is this more pertinent than for fixed income investors, as purchasing a country’s sovereign bonds requires a leap of faith that the yield available will compensate you for the risks taken for many years into the future. But the decline in US economic fundamentals and the fact that policymakers’ intentions may be at odds with the interests of bond holders, make us question the role of developed market sovereign bonds as a benchmark financial asset and portfolio safe haven going forward.

Next, Fund Manager Shaun le Roux argues that because commodities tend to experience multi-year cycles and can be quite volatile, their popularity tends to wax and wane over time, and they are currently underrepresented in most investment portfolios. This is unfortunate, as we think they can play a valuable role as part of a diversified portfolio, given the low starting valuations for select commodity shares combined with the attractive underlying supply-demand dynamic. Providing a practical example of our thinking on commodities, Analyst Nomandla Duma then shares a case study that unpacks the investment thesis for Anglo American and the impact of copper supply constraints.

In the final article, Head of Fixed Income Lyle Sankar shares how we actively apply high-quality decision-making to protect capital as part of our fixed income process. Using recent and upcoming elections as examples of how we think about event risk, he shows how we purposefully aim to minimise the likelihood of losses in our funds, rather than only focusing on picking the winners.

We trust that you will find these articles insightful, and their guidance valuable in these turbulent times.