In this Conversation, Barings’ Global Head of Equities, Ghadir Cooper, discusses the recent equity market volatility and the continued attraction of emerging markets.
Can you start by telling us how today’s equity market conditions are similar to or different than those you’ve witnessed in the past?
At Barings, our equity team takes a long-term approach to investing and many of us have been investing actively for decades through the course of many cycles—so we have certainly witnessed quite a bit of change. One such change has been the effect of passive investing on market dynamics. This has firmed our belief in the value of active investing; markets remain inefficient and we believe that active management is the most effective approach to capitalize on these inefficiencies, as we seek to deliver superior risk-adjusted returns compared with benchmark (passive) investing over time.
This is particularly relevant now as correlations between and within markets have reduced substantially since their recent peak in 2016. This means that the opportunity for active managers to add value increases.
We are entering a period where central banks globally are withdrawing stimulus in a measured fashion and that, from time to time, can cause some anxiety in markets. However, ultimately we believe that equity returns are a reflection of the health of the corporate sector where earnings are still on an upward trend and valuations—especially in emerging markets—are not stretched versus the growth potential.