We believe it is probable that the current volatile markets, minimal visibility and low levels of global growth will persist over the medium term. The high volatility and weak growth is driven by global political and economic uncertainty. The predicament is made worse by the benign monetary policy “levers” that world leaders have at their disposal to improve confidence in achieving GDP growth targets. The future is uncertain. Competitive advantages gained by large blue chip companies over many years are being lost over night due to disruptive technologies. Management teams and hierarchal structures of old are being replaced by smaller dynamic teams. Capital is finding its way to new value built systems whereby number of users overshadows the bottom line.
In light of this Asymmetry wilm continue to develop and build ideas around the following themes:
Companies’ barriers to entry or so-called “moats” as Warren Buffet describes them are melting away. Most incumbent businesses are vulnerable to competition and technological disruption. Furthermore, this transformation is happening at an unprecedented pace, and it is accelerating. Power has shifted from companies to consumers, and their expectations have never been higher. Companies can no longer get away with poor product offerings, at least not for long. Today, bad product reviews trump clever marketing. Power has also shifted within companies as individuals or small teams can have significant impact on the company operations and efficiencies.
We think the successful sustainable business models of the future will be those that can combine technical knowledge and business expertise with greater creativity. Most corporate giants today are slow by design and at risk to the age of internet. Asymmetry expects some negative surprises from less nimble companies. Company culture has become a key element of success in today’s corporate environment. Working in smaller teams, fostering synchronicities, synergies and connections amongst business units will win the sustainability race, in our view. The creation of superior products based on unique technical insights will also contribute to sustainability. It is not likely all new technology will be successful. Some new technologies will serve to entrench and grow industry leaders’ market positions and others will be explosive and disruptive to entrenched industry players.
Over the coming months, the Fund will begin to build positions and specifically research ideas to gain exposure to the outcome: that water and service providers to the water industry will benefit as the value and demand for clean potable water increases while resources diminish. Water is important to Asymmetry.
Food is the next most important feature to life on this planet. Asymmetry likes food outcomes because humans need to eat everyday regardless of whether or not the S&P500 is down 50% in a year. Furthermore, the food industry has recently entered a period of great disruption which creates asymmetry. A major contributor to the disruption is caused by the age of information. The consumer is quickly understanding the poor health practices within the food services industry including each level of vertical integration. It is causing significant effects on consumer eating habits. We expect this trend to gain momentum. Human beings’ health and wellness as well as climate change is at the forefront of government and political agendas. Asymmetry suspects these factors will contribute to necessary change in the industry. The recent sugar tax to be implemented in South Africa is an example of such a change in policy.
Soft commodities: Asymmetry is currently analysing a variety of investment opportunities in these markets. Real-life deliveries take place on a seasonal basis to feed country populations. We have found significant amounts of information and pricing arbitrage year in and year out. Furthermore, climate change exacerbates these arbitrage opportunities. These markets provide a good liquidity risk mitigate for our food producer and services positions.