Brexit, the election, and your investments

Steve Clayton - Fund Manager

9 December 2019

Whichever way the election goes, Brexit isn’t over. It might seem more over if Boris Johnson gets his majority, but in truth, leaving at the end of January is just the beginning.

If we get a hung parliament, who knows what’s next, that would all depend on who’s prepared to play nicely with who. Should we see Prime Minister Corbyn standing on the steps of Number 10, thanking the voters for placing their trust in him with a clear majority, then it’s safe to say the market will be moving a bit, regardless of Brexit.

Given the UK has never left the EU before, no-one can categorically say what the overall economic impact will be. Not least because our future trading arrangements have yet to be settled. Sterling remains a wild card. When the referendum result broke, the pound dived against other major currencies. More recently, it seems to react positively to ‘controlled Brexit’ signs and weakens on any disorderly exit news. Either way, the pound is still worth less than it was in the run up to the referendum.

The outcomes can seem confusing. But in the HL Select funds we hold companies that, we believe, are in control of their own destiny. We hold around 30–40 stocks in each fund, so each one can make a real difference to returns, though it is a higher risk approach. And we are free to invest in large, medium or higher-risk smaller companies, which gives us flexibility. So even in our two UK funds we have plenty of shares that earn much of their money overseas. But the HL Select Global Growth Shares fund goes a step further and directly spreads investors’ money around the world, including higher-risk emerging markets.

Like any investment the HL Select funds can rise and fall in value, so you could get back less than you invest. This blog post is not personal advice, if you’re unsure an investment is right for you, seek advice.

Global Diversification

We think investing a proportion of a portfolio into global markets makes a lot of sense. It can reduce dependence on events in a single market, and allow investors to take advantage of a wider range of opportunities than those available back home.

In the HL Select Global Growth fund the companies are spread across North America, Europe, Asia and Australasia, including a handful of leading UK businesses, and most of them are selling goods and services all around the world. So whatever happens back here in Blighty isn’t going to move the dial too much, compared to progress in the much larger markets of the USA, Asia and Europe.

Strong competitive positions

We’ve invested into businesses that we believe have very strong competitive positions, like Microsoft, where Windows and Office dominate their markets decades after they first launched. Or LVMH, the world’s leading collection of luxury brands, who sell their handbags, jewels and fashion to the world’s wealthy wherever they are.

A changing world

The world’s changing and we like companies that are capitalising on it. CDs have given way to streaming, and artists must now go out on the road to keep the money rolling in. So we’ve invested in LiveNation, which dominates the industry through its huge portfolio of concert venues and its Ticketmaster and event sponsorship businesses put it into pole position to capture a share of the increased touring activity.

In some ways, LiveNation is an oddity, because its market is becoming more physical, when most are becoming more digital. And that’s the reason the fund has a strong technology focus, with exposures to simulation & design software companies (Ansys and Autodesk), digital creativity (Adobe) and digital entertainment in the form of Ubisoft, the games publisher.

Our healthcare investments are pushing the edge of the possible in areas from patient monitoring (Masimo Inc) to diagnostic testing (Diasorin), whilst in the financial services industry we’ve invested into businesses with a distinct digital flavour like Paypal and Charles Schwab whilst giving traditional banking shares a miss.

Long term trends

We try to find businesses that aren’t simply dependent on the general state of the world for their growth. No-one’s immune from the ups and downs, but we think businesses which are tapping into other sources of demand are better prospects for the long run.

Visa won’t be untouched if the world slows down, but should be insulated because of the growth of electronic payments, especially contactless, at the expense of cash. People get poorly in bad times as well as good, and the new generation of biologic drugs to treat complex conditions like cancer require complex packaging and dispensing solutions, where West Pharmaceuticals is the global leader.

Trends like these will carry on regardless of the course of an event like Brexit. This is at the heart of the HL Select philosophy. We want to back the long term winners, the businesses that are in charge of their own destiny.

You can see every holding in the portfolio, and find out why it was chosen, on the portfolio breakdown page.