In an article entitled Small talk: The Last Samurai, Schroders said the IPO cycle is in “full force.”
Schroders senior portfolio manager Marcus Burns said: “None of these facts give us cause for celebration as investors as we would rather be loading up our portfolios with heavily discounted securities in poor markets.”
Mr Burns said that with competition rising, it is only a matter of time before “these forces start to crimp current business growth, margins and thus business duration”.
Mr Burns pointed out that best businesses operating within this environment are those that are concerned with their duration and moat as much as their growth.
“What appears certain is that business duration risk is rising and this is something few investors or management teams seem to be addressing,” he said.
“Our best defence in these circumstances is to try to find good companies with business moats by virtue of their location next to the metaphorical hot spring of superior business strategy and execution.”
According to Mr Burns, Schroders “tries to resist the call to follow popular paths”.
However, most investors rather “pour more money into an expensive consensus bull market than hold their ammunition for less consensual and thus more bargain-laden times.”
