Holly Black: Welcome to Morningstar. I'm Holly Black with me is Margaret Lawson. She's Manager of the SVM UK Growth Fund. Hello.
Margaret Lawson: Good morning.
Black: So really a strange time to be a fund manager, you're focused on the UK? What are some of the key trends you've spotted in the last few months from the Covid-19 crisis?
Lawson: Well there’s been acceleration in quite a number of trends. The things that perhaps would have taken three, five years, even 10 years to take place actually happened in few months. And I've said to you there, we're looking at the rise of technology, the acceleration of technology, and we're doing more working from home and that's obviously been a great success for many companies, that transition.
And I think, all the things that we've seen will actually continue going forward. So working from home has been a big thing. And also time we are spending in our home, that's obviously risen, the rise of ecommerce, the rise of food delivery, medical consultations at home. So you see quite a number of these trends, I think that will accelerate. But what it really does, is these businesses were structurally challenged going into this pandemic, are actually going to be much weaker coming out of that. So we’ve had a strong model going into that - this, going into this recession pandemic is likely to be that it will be stronger coming out of that.
Black: So one of the things you mentioned, that was the rise of ecommerce and I think the retail sector is really in the spotlight at the moment. Do you think the bricks and mortar retailers can recover?
Lawson: It’s more multifaceted than that. It's more about engaging with your consumer, about value, the rise of influencers, social media, it’s all about being relevant and being sustainable. So you see bricks and mortar retailers I think must invest in technology end to end and it's not just about transactions. It’s about, making most of the data that you have on your customer and actually being relevant, that's actually much more important than location. Obviously, you're not going to have any flagship stores like they once had. And this is more an acceleration of a trend rather than a step change.
And I think, you're going to see increasing penetration. But I think you're also going to see it's not just about, about retailing conventionally. You know, I think that lot more services are going to become more ecommerce delivered, and so there’ll be less need for physical space. But there are not winners in that you know, like logistics is obviously going to remain a winner. Office spaces as such, are you going to need office spaces, are you going to need the shop, clearly clearly no. I think what you see is an acceleration of poorly located, poor quality retailing space will disappear. And obviously a number of branches companies have that will shrink, I can see it shrinking by like 20%.
Black: And you mentioned that you expect to see much less need for that physical space, whether that's office because people are working from home or flagship stores. What does that do to the outlook for the property sector? Do you think?
Lawson: I think there will still be a need for well located office space. So I don't really worry about sort of London office space in the longer term, obviously, in the short term there will be pressure on rents. Because obviously, all chief executives going into this pandemic or coming out other side are going to be looking to reduce some costs. That's it. And the first thing they’re going to see is, do we need these expensive headquarters. And there are new models coming out shared headquarters, one company uses it on Monday and Wednesday, and other uses it for Tuesday and Friday, but you're still going to have a need for relevant buildings.
Black: So with all of that in mind, have you made any changes to the portfolio in the last few months?
Lawson: Well, I was saying to you, we were really, our portfolio really follows quite a number of these themes even before the pandemic. So, we did have prior exposure to logistics or exposure to platforms and ecommerce. And that's actually been accelerated. So actually, I've added a few companies, you know, I bought some technology companies. Because I see, as companies have to reduce costs they are going to have to invest in robotics and other things. So I've already bought a little bit more technology, but really, we’ve actually had quite a number of these things. So I really see this as our time.
Black: Margaret, thank you so much for your time. For Morningstar I'm Holly Black.
