Speaker 0:
joining me here in the studio of Joe McDonnell, chief investment officer at border to Coast. Joe, Thanks for coming in. Thanks, Rory. So, Joe, give me your outlook. We've got stubborn inflation. We've got rates going really high. What are you seeing at the moment?

Speaker 1:
Where I? I think going into this year, uh, people were were were thinking more of the same from last year. So a lot of volatility, as you say, Rates going higher. Uh uh. You know, inflation. There are certain aspects that were slightly under out of control, whether it's, you know, service inflation or wage inflation.

Speaker 1:
Um, so it's a bit of a surprise. Actually. The markets have done so well this year, and that's been driven by perhaps a focus on other areas like, for example, new technologies, a IS, which has created obviously a massive rally in text stocks and also the kind of recognition Yes, rates are higher, but we're getting to a point of peak rates. So peak inflation in Q one peak rates now or close to peak rates, maybe another 25 basis points, maybe 50. But you know, investors are looking through that and thinking well, we've got this far without a significant correction

Speaker 1:
and really having having come, you know, the last 18 months, 18 months, two years of all these successive rate increases and markets where they are is is quite remarkable. Um, so from our perspective, really, the outlook from here, we're not sure it can necessarily get much better from here. We do see a lot of, uh, fiscal challenges that we've seen in the US. Uh, very recently,

Speaker 1:
Uh, we do also think that there's a lag effect on the interest rate side of things as well, where smaller companies will really struggle. Uh, perhaps in the end of QQ four, beginning coming in next year as well. So we're not out of the woods here. So from our perspective, we think, uh, you know, investors should be thinking about potentially taking some risk off the table and how a

Speaker 0:
border of Toco is positioned.

Speaker 1:
So look, uh, we we've benefited like other investors from these great returns. You know, equity markets up, you know, You know, 17 80% year to date develop markets emerging markets of about 11. 12 and and credit spreads have been relatively stable. So good returns and fixed income as well. So we are trimming positions. So from our perspective, um, we are taking some profits, if you like. On the tech side of things, we like quality. We think at this stage in the cycle, having more defensive equities, we think, makes more sense. So more quality emphasis for us.

Speaker 1:
Uh, we are concerned about small cap, so more of a kind of a large cap. Focus on quality. Uh, we think emerging markets actually is an interesting space. We think very much in terms of getting on top of inflation and actually getting to the point of reducing rates. That's where emerging markets are. So we like emerging markets relative to developed markets.

Speaker 1:
And then finally, we think that there's a lot of still good opportunities in in the alternative space. So liquid alternatives. We we like infrastructure. Uh, we like private equity. We can get into positions that significant discounts. We also think commercial real estate is an area which is under a lot of stress. At the moment, we think there's good discounts and good entry points there as well.

Speaker 0:
What opportunities are you seeing in the private space? In particular?

Speaker 1:
Yes. So we've, uh, our partner. Funds are are are very focused on building private markets exposures, and they've committed over 12.5 billion of, um, of assets across private equity, private debt and infrastructure over the last five years. And every year they're making fresh commitments. So in terms of a segment of the market, there's a There's a real belief in the diversification benefit and the premier, whether it's, uh, you know, general private market premier or complexity premiums on that's available in those markets.

Speaker 1:
Uh, so, you know, long term strategies to continue to build private market, um, strategic allocations in terms of what we see opportunities today. Uh, well, a couple of years ago, we we launched our first climate opportunities fund, which was a thematic portfolio multi asset, really thinking about how to, um how to, if you, like, benefit from the the transition If you like to zero carbon through time through investing in alternative infrastructure,

Speaker 1:
renewables and and and trying to identify technologies as well, which I think will will help make that transition. So, uh, you know, our our partner funds made significant commitments into that strategy, and we continue we continue to believe it's a very interesting space, and we'll launch our second version of that fund in the not too distant future.

Speaker 1:
We also think there's a lot of opportunities potentially here in the UK. Uh and we think, uh, you know, the combination of the levelling up agenda, which has been talked about over the last couple of years but also, um, the opportunity to to make investments in, you know, venture capital and growth in the UK is very, we think, potentially very attractive over the coming years. So we tend to we're going to launch another multi asset thematic

Speaker 1:
strategy in that space called UK Opportunities next year. So they're the two areas which we think are from a thematic perspective, quite interesting. From a valuation perspective and a short term perspective. We do see significant discounts in some liquid alternative strategies. We see it in in listed private equity. We see it listed infrastructure, good access points. We also think that there's, uh, significant discounts available, uh, on commercial real estate. So we're looking to exploit that as well,

Speaker 0:
Joe. Thank you very much. Thank you,

Speaker 1:
Rory.