The world is entering the final ten years of the old technological paradigm, and within the next decade we will experience the most profound technological revolution of the last 100 years, according to Brian Walker and Peter Trofimenko, co-founders of Symphonic Alternative Investments, a new Virginia-based hedge fund manager.
Major disruptions to the present way of life will come from a combination of technological advances and cost reduction in the following areas (in alphabetic order):
These changes are inexorable, they continue, and are the results of years “of compounding scientific research, advancement of computing power and progress in manufacturing technologies available currently that were simply not available even one generation ago.” And technologies improve at exponential rates.
The implication for investors is that “investing in the “old economy” might be likened to picking pennies in front of a steamroller,” they add. And looking at the western economies and the emerging markets separately won’t make sense any more, as innovations are seen – and encouraged – everywhere.
Investors will find businesses where businesses are welcome, and not necessarily where there is plentiful labour force (which in itself might be a risk). “The winners in this new reality will be found among beneficiaries of deregulation, reduction of tax burden, and the ability to maintain or increase margins in the face of production price pressures,” they say. This is happening not only in the US, but also in China, the Far East and Russia. These regions also benefit from their proximity to clients and time to market, and large internet markets.
So the opportunity set is not to be found in any particular country or stock exchange.
“Traditional classifications such as developed or emerging markets are about to be shattered,” they conclude. “The fact is that the modern technology company cannot be simply classified as it reaches across national political, regulatory, taxation, monetary and fiscal regimes. Rather than focusing on whether a company is labeled as developed or emerging, we believe that investors should prioritise company fundamentals, building portfolios that include attractively valued companies with sustainable competitive advantage, scalable business model, high earnings growth rates and a healthy balance sheet.”
Arlington-based Symphonic Alternative Investments, LP is an investment manager focused on global equity markets. Chief executive officer Brian Walker and chief investment officer Peter Trofimenko co-founded Symphonic in 2016 after 10 years of working together investing in a wide range of global emerging and frontier markets at EMM, now a subsidiary of Ashmore Group.
In July, they launched two equity long/short equity hedge funds: one which identifies overvalued, undervalued or mispriced equities in emerging markets and uses fundamental analysis and proprietary ranking techniques; and one which follows a similar strategy in the universe of global equities.
“We prioritise attractively valued companies with sustainable competitive advantage, scalable business model, high earnings growth rates and a healthy balance sheet,” Peter Trofimenko tells Opalesque.
For the six months ended December 31, 2016, Symphonic EM Opportunities Fund achieved a net return of 14.59% and Symphonic Global Opportunities Fund 12.05%. The two funds manage together $11.1m.
“Within the long portion of our portfolio, during 2016 we identified opportunities in individual companies in the technology, energy and industrials sectors of Brazil, China, Korea, Taiwan and Thailand, as well as other countries,” he adds.
“As an example, we invested in a company based in Thailand that specializes in precision optical, electro-optical, printed circuit board assembly (also known as PCBA) and electro-mechanical process technologies for high-mix, any-volume production. This company’s quality, flexibility and skill in managing complex operations in lower cost Southeast Asia has made it a trusted partner of many of the world’s top original equipment manufacturers.”
wordpress theme by initheme.com