Concerns over stretched technology valuations are encouraging a closer look at investment strategies designed to behave differently when equity markets come under pressure. Global Opportunities Trust stands out in this environment because its managers are not simply seeking attractive companies, they are also deliberately targeting holdings that can provide resilience when broader markets struggle.
The backdrop is an equity market that has been heavily influenced by enthusiasm surrounding artificial intelligence. Technology stocks and other perceived beneficiaries of AI spending have enjoyed substantial attention, but rising valuations have also revived comparisons with previous speculative cycles.
Global Opportunities Trust takes a differentiated approach to that problem. Its three managers, Alan Bartlett, Dr Sandy Nairn and James Sym, aim to generate real returns of around 5% a year over the long term while maintaining very low correlation with global markets, particularly during periods of market weakness.
The portfolio is built around themes that the managers believe can identify companies capable of holding up better in difficult conditions. These include businesses that may benefit from geopolitical or cyclical developments, such as defence companies, alongside resilient businesses with the ability to withstand challenging economic environments. Unilever is cited as an example of the latter.
Valuation discipline is another central part of the strategy. The managers are unwilling to pay excessive prices even for businesses that fit their preferred defensive characteristics. That approach is designed to provide an additional layer of protection if market valuations contract, reducing reliance on continued investor enthusiasm to support portfolio holdings.
Global Opportunities Trust also has considerable flexibility over how much capital it commits to equities. Approximately 28% of the portfolio was held in cash and equivalents. A large cash allocation may help cushion the trust’s net asset value if equity prices decline, while also providing the managers with capital to deploy if preferred businesses become available at materially lower valuations.
Global Opportunities Trust plc (LON:GOT) invests globally in undervalued asset classes without reference to the composition of any stock market index.
