While
the past year has seen significant volatility in world financial
markets, much bigger changes occurred over the past decade as
a truly global economy emerged from the wreckage of the Cold War.
Here's a brief look at the implications that has for international
investors.
Over the past decade investment markets faced spectacular political
and economic change. The collapse of communism added millions
of consumers (and producers) to the global market. And, while
they face major problems today, economies in Asia and Latin America
are still far advanced of where they were in the 1980s.
At the same time technological advances now enable businesses
and investors to move capital, goods and services around the world
ever more quickly and efficiently.
How does this affect the companies that international investors
invest in?
Today companies confront global competition. That competition
forces them to cut their local cost structures to stay competitive.
The need to lower costs means many companies need to find critical
mass, that is, sufficient size to compete on costs and to sell
to a global market.
Get
big, get smart or get out?
Global competition has other consequences. Old industries decline.
Production of goods and services is moved offshore, to cut costs
or get closer to major markets. Today, Mercedes-Benz builds four-wheel
drives in Alabama and IBM builds notebooks in Mexico.
The drive towards greater efficiency encourages greater specialisation.
Businesses outsource many of their non-core activities, operating
more efficiently with less capital.
To
strive, to seek, to find
Globalisation radically increases the demands on a fund manager
investing in global sharemarkets. At BT have responded by increasing
resources and improving how they are allocated.
Today we have more than 100 analysts seeking investment opportunities.
Every year they undertake more than 3000 visits, calls and videoconferences
with company management. Analysts have access to a sophisticated
central database containing information about 4000 companies worldwide.
Those resources allow us to undertake intensive research, on a
global level, into a far broader array of companies.
Until recently we operated in tightly focused teams that sought
opportunities in specific regions such as North America or Europe.
To deal with the forces of globalisation our analysts are now
organised not just in regional teams, but in sector groups as
well.
We have taken the analysts covering a particular sector, say auto
stocks, in each region and formed a sectoral group. That group
has formal responsibility for monitoring global trends in the
industry and comparing valuations between companies in different
parts of the world.
Overlaying their work is a strategy group that keeps track of
strategic and economic issues that could affect our investment
decisions. Just as importantly, we have a team of experienced
currency managers focusing on the international currency exposure
of our funds. By managing our foreign currency risks, we can protect
the portfolio from any negative moves in international exchange
rates, particularly when the Australian dollar is strong.
Today the BT equity process combines bigger, better-deployed resources
with the maintenance of our core principles, summed up in BT's
three golden rules.
THREE
GOLDEN RULES
-
Buy
shares in a good business at a fair price
- Value
a business the way a business person would
- Only
invest in companies you understand
Disclaimer
This
information is given in good faith and has been derived from sources
believed to be reliable and accurate. However, the information is
selective and Bankers Trust has not verified all of the information,
which may not be complete or accurate for your purposes.
None of the companies of the Bankers Trust Australia Group, nor
any of their directors or employees give any representation as
to or warranty of reliability, completeness or accuracy of the
information, nor accepts any responsibility arising in any way
(including by reason of negligence) for errors in, or omissions
from, the information. This disclaimer is subject to the contrary
provisions of the Trade Practices Act.
