e-fundresearch.com: From a V-shaped recovery in Q1 to a summer full of global recessionary fears: What are your personal lessons learned from year-to-date market developments?
Farman-Farmaian: The low interest rates around the world indicate soft or negative growth prospects. They could also be signaling deflation. That has meant investors are ever more desperate to reach for yield and to find "real" growth. That has led to all the Central Banks globally getting busy injecting monetary stimulus in to financial assets. The result has been all the world's stock markets have rallied strongly despite worries of economic slowdown.
e-fundresearch.com: How did your strategy manage to perform in this challenging market environment and which particular investment themes have delivered the strongest (worst) performance contribution on a year-to-date perspective?
Farman-Farmaian: Our strategy of investing in high-quality U.S. Growth equities has very much benefited from these conditions. These companies have some of the fastest growth offered anywhere in the world. The fact that the U.S. household sector is still in solid shape, unemployment is low and they have continued to spend has very much favored U.S. growth companies that cater to these consumers, who account for 70% of the domestic economy.
e-fundresearch.com: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome in the remainder of 2019 and early 2020? To what extent does your current portfolio positioning take those expectations into account?
Farman-Farmaian: Although we could always experience a short-term sell-off, like we saw in the 4th quarter of 2018, we continue to be cautiously optimistic. We believe that slow economic expansion globally, coupled with Central Bank stimulus will very much continue to favor U.S. Large Cap Growth equities.
e-fundresearch.com: Why should investors consider an (increase in) allocation to your asset class and in particular your strategy in the current environment?
Farman-Farmaian: This environment benefits U.S. growth stocks because their materially faster relative profit growth and earnings yields is all the more obvious for investors to appreciate versus almost any other asset class. They grow fast when the rest of the world is struggling to grow at all. We try and find safe businesses, excellently managed global enterprises, and we like to find recurring revenue type investments as they help de-risk the portfolio of the long-term investor. Remember that stocks are a small ownership of a company. An investor will only ever make profits investing in the stock market if one chooses great businesses which are well managed by honest, hard working management teams. That is what we focus on.