Executive Summary
The investment landscape has fundamentally shifted. Passive investing now exceeds active management globally, driving unprecedented concentration in equity indices. The top 8 companies in the MSCI World Index are identical to the NASDAQ 100’s top 8, creating a situation where standard global equity exposure has become, in effect, an investment in big tech.
This paper explains why the GuardCap Global Equity Strategy maintains exposure to AI through high quality companies with large, unique proprietary datasets, rather than through the AI infrastructure builders, and maintains its focus on balance sheet quality at a time when massive infrastructure build-out is leading to deteriorating cash flow and balance sheet quality. More generally, we examine the risks inherent in current passive investing trends, and demonstrate why we believe that our strategy is one of few to offer genuine diversification, essential in today’s elevated risk environment.
Finally, we consider how the current headlong rush into AI is creating unprecedented valuation opportunities in companies in other industries with elevated growth rates and safe, steady, resilient business models that are not excessively sensitive to global GDP growth trends.
