Global Equities
Global High Conviction
Investor Updates
April 2025 | Investor Update
Of Tariffs and Turbulence
Markets had another wild ride but squeezed out gains as Microsoft (owned) and Meta (not owned) produced good results and share prices rose. The market capitalisation global index rose about 0.9% in US$. The Value weighted index was flat so Growth outperformed Value driven by a bounce in the largest companies. The Global Infrastructure index rose over 3% in US$.
Many CEOs used the tariffs’ threat as a reason to pull guidance. We think that companies will next use the excuse to lower eps guidance. Profitability has been very high in the last few years and possibly enhanced with non-sustainable methods, so any externally provided excuse to re-set is tempting. We try to avoid these potential land mines with a Quality or Resilience quantitative factor which assesses the quality of profit growth and the balance sheet.
Much more will be written on tariffs, from all perspectives, by many fund managers. We’re compelled to comment but it’s brief.
Think of tariffs as an oil price shock a la 1973 and 1979. Those countries that accommodated this increase in input prices with monetary easing had nasty inflation – eg the UK especially, and the USA. Those that didn’t, such as Japan and Germany, didn’t. Consumers in those countries had to switch preferences due to relative price changes; the general price level did not rise, and the private sector produced products for the new environment – eg the auto industries designed much more fuel efficient cars. Nuclear Power was also bult out heavily in Japan and France to reduce the oil dependency in those countries.
Allowing demand destruction, private sector innovation, and price changes as a signal to suppliers to invest or not invest has to be allowed to return if we are to escape the very low growth and persistent inflation scenario. This will occur by not accommodating the tariff/tax increases with monetary easing. Fed Chairman Powell is correct in not cutting rates until he sees the end game from suppliers, investors, consumers, lenders, but he is misleading us with his rhetoric. It’s not the tariffs that are inflationary it would be his accommodating of them through monetary easing that would be so.
If we were asked our opinions on re-setting Western economies, which the USA administration at least has indicated it wishes to do, we would actually start with the premise that cutting wages to better raise productivity and allocation of capital is pretty hard to do or allow politically. So, to encourage private investment and allow the market to work, you have to allow workers to be sacked rather than cut wages, BUT have much better re-training labour at free or low cost so frictional unemployment is kept to a minimum. It is somewhat crazy that a society that believes it is in the 4th economic/industrial revolution and therefore will see rapid rates of job obsolescence, doesn’t have a support mechanism to re-train their people at low or no cost so the pain of job loss is kept to a minimum.
Some small tweaks to the strategies were made but nothing significant. The chances of a recession are high if you believe the Kalecki equation holds (we do).
Significant gains were seen in Andritz, Kajima, Kroger and Emcor. Oil companies Schlumberger, Chevron fell by over 15%. We remain overweight as recent power cuts in Spain and cancellation of wind power projects in the English Channel indicate that the ‘renewable’ technology is not yet competitive.
Fund Performance
Portfolio Highlights
Engie SA is a global energy powerhouse operating across renewables, nuclear, flexible generation, and infrastructure. In a world grappling with the flaws of a fully renewables-dependent system—as highlighted by grid failures in Spain and Orsted’s wind investment setbacks—Engie’s diversified approach provides resilience. With operations spanning hydro, solar, wind, gas, and battery storage, the company is well-positioned for a more balanced energy transition. Recent developments include a €1 billion investment into UK pumped hydro projects and a 2.4GW battery storage partnership in the U.S., enhancing grid flexibility. Financially, Engie delivered €4.1B in net income in 2024, with a strong 7.83% dividend yield and improving return on equity (12.9%). As OPEC supply comes back online and oil prices stabilise, mixed-energy firms like Engie gain strategic relevance. The company also maintains an excellent ESG standing (score: 73/100), and France’s recent pro-nuclear stance supports its growing nuclear segment. Trading at under 10x forward earnings and a modest 1.29x P/B, the stock offers value and defensive energy exposure. The dual exposure to base-load and intermittent energy positions Engie as a long-term winner in a pragmatic energy reset.
A2A is a leading Italian utility with a uniquely integrated model, spanning clean energy, waste-to-energy, water management, and power grid services. Amid growing recognition that renewables alone cannot guarantee reliability, A2A’s hybrid portfolio of hydro, solar, thermoelectric, biomass, and wind plants allows it to adapt to changing policy environments. The company is benefitting from regulatory shifts, like the EU’s acceptance of nuclear as green energy, which de-emphasises an overreliance on renewables. In recent quarters, A2A posted robust results, with Q1 2025 EBITDA rising to €2.07B and net income of €827M. Recent acquisitions—such as Enel’s electricity distribution assets in Milan and Brescia—expand its grid control and infrastructure base, vital for balancing intermittent and baseload supply. Capital investment is growing, with €1.1B in capex reinforcing future returns. Its 4.46% dividend yield and a 10.2x forward P/E provide a solid income/value mix. ESG metrics remain strong, and a Paris alignment target of 2–2.7°C reflects decarbonisation progress. A2A’s local dominance and diversified model make it a rare European utility able to navigate both the energy transition and the reality of fossil fuel resurgence.
Quanta Services is the unsung hero of the energy transition, building, maintaining, and upgrading the very infrastructure required to accommodate both renewable and traditional energy sources. As global grids evolve to support mixed power inputs—balancing solar, wind, nuclear, and fossil fuel—Quanta’s engineering and grid services become essential. The U.S. energy system, especially with its aging grid and increasing weather-related disruptions, is in desperate need of investment, a trend Quanta directly benefits from. Financially, the company is thriving: FY24 revenue hit $21.5B with adjusted EBITDA of $2.1B, while its backlog reached a record $29.3B, reflecting strong visibility. Its strategic expansion into renewable infrastructure (EV charging, transmission, battery storage) aligns with federal stimulus programs. With utilities like A2A and Engie investing in hybrid grids, Quanta stands to gain as their go-to partner for grid integration and reliability. A disciplined balance sheet, strong free cash flow, and robust ROIC support long-term value creation. In an uncertain energy world, Quanta is a shovel-to-the-gold play—pivotal, scalable, and often overlooked.
Fund Facts
Investment Parameters
| Management Style: | Active |
| Investments: | Global Equities |
| Number of securities: | 80-110 |
| Single security limit: | +/- 5% relative to Investable Universe |
| Country/Sector limit: | +/- 10% relative to Investable Universe |
| Market capitalisation: | US$2+bn |
| Derivatives: | No |
| Leverage: | No |
| Portfolio turnover: | Typically < 25% p.a. |
| Cash level: | 0-100% (typically 0-10%) |
Fund Profile
| Investment Structure: | Unlisted Unit Trust available to wholesale or sophisticated investors |
| Minimum Investment: | $100,000 |
| Management Fee: | 1.00% p.a. |
| Admin & Expense Recovery: | Up to 0.35% |
| Performance Fee: | 20% of performance in excess of hurdle |
| Fee Cap: | 2% of total FUM |
| Entry/Exit Fee: | Nil |
| Buy/Sell Spread: | +0.25% / -0.25% |
| Applications: | Monthly |
| Redemptions: | Monthly with 30 days notice |
| Investment Horizon: | 3-5+ years |
| Distributions: | Annual |
