Global Rebalancing: The Center of the World is
Changing
Ivy Funds
Michael L. Avery, Daniel J. Vrabac and Ryan Caldwell,
portfolio managers of Ivy Asset Strategy Fund, provide
details of recent team member visits to companies in
India and the United Arab Emirates.
In order to properly manage a highly diversified global
asset allocation fund, it is often required of portfolio managers and
analysts to get out from behind their desks and away from their computer
screens and head out into the real world. In order to test our ideas,
discover new opportunities, and gain a better understanding of the risks,
members of the Ivy Asset Strategy team venture out to those areas of the
world we think are essential parts of the global re-balancing story.
For the past several years we have been promoting global
rebalancing as our primary investment theme. To review, we define global
re-balancing as a shift away from growth dominated by the U.S. and towards
a path where more countries contribute — especially emerging and
developing countries. We believe that this theme has several years to run.
It will proceed at a different pace in each country, and will have a
variety of forms. As such, it should be recognized as an evolution rather
than a revolution.
Some of the best investment opportunities going forward
will be in developing countries with the strongest growth. However,
investors must understand that growth in and of itself does not guarantee
strong asset price appreciation (see Chart 1 on China). Several other
factors are important as well. The Ivy Asset Strategy team will continue
to do its best to discern those factors that lead to rewarding individual
asset selection.
Our recent overseas trips have brought to the fore a new
aspect to the global re-balancing theme — the development of direct ties
between emerging markets such as China and Brazil, India and Indonesia,
the Middle East and Russia. There are two implications to this: (1) there
is less reliance on the U.S. as an export market, and (2) there is less
reason for a country to tie its currency (and monetary policy!) to the
U.S. dollar. This is a sea change in the global economy, and is the theme
that underlies the title of this article — as the world becomes less
U.S.-centric, the economic center of the world is changing.
This report will highlight two recent trips by members of
the Ivy Asset Strategy team to the United Arab Emirates and India (UAE).
As you can see by the map in Chart 2, these two areas will increasingly be
at the crossroads of global economic activity.¹ We hope that this report
will give you some insight not only into how we look at the world, but
also how the world is changing, and what that means for investors.
Read more...
¹ An interesting historical point: We could have titled
this article “Back to the Future”. The areas of the world gaining in
importance today are the same areas which benefited from trade along the
Great Silk Road and the Spice Routes centuries ago.
