13 Questions for Martin Currie's Zehrid Osmani

Which Sector Shows The Biggest Promise in 2022?

Quality cyclicals in the industrials sector have pulled back and can perform through the cycle - some of these are exposed to long term infrastructure spending, giving them a long-term runway of growth. We also like the luxury goods sector, given its exposure to China - the sector hasn’t performed well and sits on depressed valuations, due to concerns about economic slowdown, which makes them positively exposed to any supportive monetary policy measures that could come through from China. Finally, we find some good opportunities in technology stocks with high growth and strong returns, following the sizeable sell-off since the start of the year. 

What's The Biggest Economic Risk Today?

Stagflation. 2022 is going to be a highly volatile year for equities, given the geopolitical risks, stronger inflationary pressures, and monetary policies that are needing to normalise despite the weakening economic momentum. We believe that we are entering into a slowdown phase of the economic cycle, with a still low but rising risk of stagflation, which we put at a 10-15% probability, with highest risk of such outcome in Europe.

Describe Your Investment Strategy

We are long term investors investing in undervalued quality growth companies that have a combination of attractive structural growth profiles, high returns on invested capital, strong balance sheets, dominant market positions, strong pricing power, low disruption risks, and that have strong governance, good corporate culture and sustainable business models. Our approach is unconstrained and high conviction, which permits us to focus on the very best ideas in the market, without needing to manage index exposures. 

Which Famous Investor or Professional Do You Admire?

There are plenty of successful investors as great role models, so I am leaving many out of the below list. George Soros, for his attention to detail, focus and conviction approach to investing (and also for his philanthropic focus on supporting democracies, having experienced a communist Eastern European regime, just as I have through my roots). Ray Dalio for his commitment to learning and constant improvement. Closer to home, James Anderson for his long-term investing and ability to foresee structural trends

Name Your Favourite "Forever Stock"

Given our high conviction, concentrated approach, it is difficult to choose just one stock. I would single out stocks like L’Oréal in consumer given its returns profile, Atlas Copco in industrials given its ability to cover its cost of capital through the cycle, ASML in technology given its quasi-monopolistic position which enables it to capture the long-term trends in semi-conductors, or Illumina and Oxford Nanopore in the genomics field of healthcare. 

What Would You Never Invest In? 

We have a strong focus on sustainable business models, and therefore do not invest in the tobacco sector, fossil fuels, dirty utilities, nor weapons. We also typically never invest in companies that struggle to cover their cost of capital in the long term, as this makes them unable to create value for shareholders in the long term. 

Growth or Value?

We are quality growth investors - focusing on companies with structural growth and that also generate attractive returns on invested capital. 

House or Pension?

Owning your house outright is a sound first investment everyone should aim to achieve in their lifetime, as it also typically gives you a good pension pot in later life. 

What Are Your Thoughts on Crypto?

Cryptocurrencies are highly speculative in our view, so we avoid this area of the market. We however see many useful applications deriving from blockchain, notably better traceability and safeguard of valuable assets, which can help reduce illicit financial activities. 

What Can be Done to Increase Diversity in Fund Management?

I lead a team of 10 with gender parity, six distinct cultures, eight languages spoken, and generational diversity ranging from 3 years to 28 years’ experience, so I am very focused on diversity. I have a multi-cultural background myself, being French with Eastern European roots.

The important thing to realise is that diversity of any sort brings cognitive diversity, which in my view leads to the right outcome when discussing investments. Many studies have shown that diverse teams perform better. Once the industry understands this, it will be a step in the right direction, but more needs to be done to accelerate that trend - it is down to each business to tackle this matter, and embrace diversity for all the benefits it brings to a team and corporate culture. 

Have You Ever Engaged With a Company and Been Particularly Proud (or Disappointed) in the Outcome?

Over the past year, we have engaged with a company in the sporting goods field, in relation to its culture and media reported issues with discrimination. We got a commitment from the CEO that he would tackle any wrongdoing, and that he would get us to engage closer with their Head of Diversity & Inclusion, once appointed.  We are still engaging on this matter, but have been satisfied by the CEO’s focus on ensuring the corporate culture doesn’t allow any form of discrimination, but also tasking the new Head of HR with challenging any status quo within the company. 

What's The Best Bit of Advice You’ve Ever Been Given?

The best advice I was given was about trust and aiming for the right outcomes for clients: when someone entrusts you with their savings, you have to do all you can to show them that their judgement was right. It reminds me about the importance of delivering the right outcome to the many clients, pension funds, savers, and investors that back us.

What Would You Be if You Weren’t a Fund Manager?

I am able to do something that I am passionate about, but as a second choice, I would perhaps see myself as a performance car engineer, for the attention to detail and avant-garde approach required to design a high performing car.