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Emma Wall: Hello, and welcome to the Morningstar series, "Why Should I Invest With You?" I'm Emma Wall and I'm joined today by Tom Walker, Manager of the Martin Currie Global Portfolio Trust (MNP).
Hi, Tom.
Tom Walker: Hi, Emma.
Wall: So, global by name and global by nature when it comes to revenues. But when you're looking at listings, sizable proportion of the portfolio is in the U.S., around 60%, and this is the region that people are quite divided over. A lot of people are saying U.S. overvalued, time to sell up. How do you feel about that?
Walker: Well, two things. I think on valuation, I think, one has to think in relative terms. Unprecedented is a much overused word but we are in unprecedented times. We've got negative interest rates in a number of European countries and Japan. We've got very low interest rates almost everywhere. And when the U.K. government is paying you 60p or so per annum for 10 years if you lend it money, you've really got to rethink valuations.
If I can find a company that's giving me, say, 10% earnings growth trading on 20 times next year's earnings, actually that's really attractive. The company that's growing its earnings, growing its dividend, creating value for shareholders, in this low-growth, low interest rate environment that's very attractive and there are certainly lots of companies of that nature in the U.S.
And as far as economic growth is concerned, it is patchy and I'm not a bull of global economic growth. I think the U.S. economy is only going to grow modestly. I don't actually think the Fed is going to put interest rates up much in the foreseeable future. But there's always a niche where there is growth.
So whether in the U.S. you're looking at investing in technology in California, smartphones, digital media, online retail, or if you're looking at other parts of the world, in Asia, if you're looking at developing consumer markets and growing middle classes in less developed economies, there's always areas that are growing more rapidly. We're certainly in an environment where the tide is not rising. All boats will not be lifted. But by being selective in global equities, including in the U.S., I think there's really good value to be had.
Wall: And we're running an education week this week. So, it's worth highlighting that although as you've spoken about before in the past, you have companies that are listed in the U.S. they are not necessarily U.S. in nature, are they?
Walker: No. I mean, if you look at a lot of large U.S. companies, they are very much global earners. So whether it's Apple selling phones in China or a company lie Visa, the payment processing company, where about a third of its earnings are in the U.S., a third in Europe and a third in the rest of the world. And a lot of the large-cap companies that I invest in are very much global earners.
A lot of their marginal growth is coming from emerging markets because that's where there is more growth. A lot of their core earnings and strong positive cash flow is coming from the more developed markets, particularly America but also Europe but they are generally speaking global earners whether they are quoted in the U.S., Europe, wherever.
Wall: And you are looking at companies that are both listed in the emerging markets and have revenues in emerging markets as well, don't you? This is not simply a U.S. story?
Walker: No, no. I mean, I think there is scope to invest selectively. I used to manage a China country fund funnily enough. So, I'm a little bit wary of corporate governance and some other issues in some emerging markets. It's getting better. But I think sometimes the best way to get exposure to emerging market economic growth and earnings growth is through developed world quoted companies. But yes, we're invested in Indonesian companies with good management where their earnings are almost exclusively coming from Indonesia and very comfortable with that if we can find the right companies.
Wall: Tom, thank you very much.
Walker: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
