Covid-19 will be the beginning of a new way of living and healthcare monitoring, says John Malloy, portfolio manager at RWC Partners.
Expert Investor talked to Malloy about how this thinking has impacted the RWC Global Emerging Markets fund’s allocations in the market turmoil and other insights he has learned from the crisis so far.
Energy-related holdings spiral down
The crisis hit the energy-related and copper positions of the fund, Malloy says.
The share prices of Russian bank Sberbank and Russian internet service company Yandex fell by -31.6% and -16.5%, respectively in March, the firm says.
But Malloy believes that these companies will grow earnings and gain market share in the country’s financial and technology sectors, as they are leading in their fields and have robust operations.
Winners of covid-19
The portfolio manager explains that the focus within the fund’s current themes changed due to the crisis.
The team added to positions in companies benefitting from the crisis as part of the theme ‘technology disruption’, which makes up 31.2% of the portfolio.
The theme means that selected companies disrupt their sectors with new business models, outcompete others with their technology specialty and grow to an oligopoly.
“And these companies would be predominantly in e-commerce, they might be in payments, delivery, food delivery services, cloud technology,” Malloy says.
The firm added for example two Chinese e-commerce companies, Alibaba and JD.com, as well as Argentinian online trading site MercardoLibre, to the portfolio’s disruption group.
Another area in which Malloy increased companies is the 5G theme.
“We believe that as governments look to put in stimulus, 5G is going to be a focus,” Malloy says.
He envisages that 5G will become important as part of wider structural changes by nations and help protect against the shutdown of economies due to pandemics.
“It is more than just consumer products, such as streaming mobile video or streaming video gaming. It has to do with the broader network in terms of security, in terms of defence, in terms of autonomous vehicles.
“And I think now, even more so, it’s going to focus on things like healthcare,” he says.
By allowing governments to monitor cell phones or social media messaging services, 5G will be the enabler for relevant authorites to watch infected people and backtrack how their contacts have been exposed, he explains.
Monitoring societies
The future will look different, in Malloy’s view, as the high economic costs that nations incur because of a virus could lead to a new way of living.
Societies will need to be monitored by governments through technology, as they need to think about protecting their people and economies, he says.
“That’s kind of the world we’re going to probably move into coming out of this.
“But the other side of that, too, is that, possibly we avoid a massive shutdown that we’ve experienced. So you have to weigh the freedoms with the economic cost,” he explains.
“And it’s pretty complicated, because there are positives and negatives to it. But that whole discussion is going to continue to come through after we get beyond covid-19,” Malloy predicts.
