Global Equity: The Odyssey, the AI Trade, and Concentration Risk | EP 219

Global Equity: The Odyssey, the AI Trade, and Concentration Risk | EP 219

AI portfolio construction in global equity markets (memory semiconductors, mega IPOs, and how to manage concentration risk) is the focus of this conversation with Mawer's global equity portfolio manager Paul Moroz. Drawing on Homer's Odyssey, he explains the discipline the team applies when navigating themes that are moving quickly: from trimming SK Hynix systematically as the position grew, to sizing up what a wave of large IPOs means for cost of capital, to the central trade-off between underexposure and overconcentration in the AI complex. He also puts numbers around the portfolio's AI positioning and explains how hyperscaler holdings act as a natural offset. The episode closes on humility as a process requirement, reflected in the portfolio's expansion to nearly 90 names with smaller, more incremental position sizing. Key Takeaways * Memory semiconductors, including SK Hynix, illustrate the discipline required around fast-moving themes. The team has sold back nearly as much as it invested in SK Hynix while the position has grown to over 5% of the portfolio — a deliberate trimming driven by ongoing valuation modeling, not a change in the thesis. The risk is not the price-to-earnings multiple; it is the cyclicality of earnings, and the question of how long the current upcycle runs. * Odysseus' response to the Sirens when he ties himself to the mast and has his crew row with beeswax in their ears is a useful analogy for process. Decisions made in advance of the moment of seduction, grounded in a systematic valuation framework, are more reliable than decisions made in the heat of a rapid move. * Large IPOs entering markets signal a more capital-intensive economic period and raise real questions about where the capital comes from. Companies already in the S&P 500 benefit from a structural cost-of-capital advantage over those outside it, and the team watches for what needs to be sold as large new issuers absorb liquidity. A period of multiple compression, while uncomfortable for near-term statements, improves long-term reinvestment returns. * The Scylla-versus-Charybdis choice (the monster on one side, the whirlpool on the other) maps directly onto the AI portfolio construction problem. The team's AI hardware exposure sits at approximately 22.7% of the portfolio; a 50% drawdown in that sleeve would represent roughly an 11-12% hit to the overall portfolio. An offsetting 15.5% is held in hyperscalers (Meta, Microsoft, Amazon) whose capital expenditure is the revenue of the hardware side, producing a natural hedge that brings net directional AI exposure to around 7-8%. * The team's response to the Cyclops story (Odysseus boasting after his victory, which brought years of suffering from Poseidon) is portfolio humility expressed through construction. The global equity portfolio now holds just under 90 names, with positions sized smaller and traded in smaller increments to reduce the cost of being wrong and to manage in a high-volatility environment. * Some holdings that look nothing like AI businesses have begun moving with AI sentiment. The team treats these correlation shifts as arbitrage opportunities: when something is priced as an AI stock but carries different underlying risk, there may be a better entry or exit available elsewhere in the complex. 0:00 - Introduction: Homer's Odyssey and the AI Trade 1:39 - The Sirens: Memory Stocks, SK Hynix, and Valuation Discipline 7:54 - Managing a Position That Has Grown Beyond Its Cost Base 10:30 - Mega IPOs, Cost of Capital, and Index Inclusion Advantage 15:49 - Scylla vs. Charybdis: Choosing Your Risk in AI 17:58 - AI Portfolio Construction: Numbers, Offsets, and Net Exposure 23:11 - Correlation Creep: When Non-AI Stocks Start Acting Like AI 24:42 - The Cyclops Story: Humility, Diversification, and Process 26:53 - Closing: Managing Money Across Generations 27:15 - Outro and Subscribe Host: Rob Campbell, CFA, Institutional Portfolio Manager Guest: Paul Moroz, CFA, Global Equity Portfolio Manager This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit us at: https://www.youtube.com/@MawerInvestment https://www.mawer.com [https://www.mawer.com] https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/]

Looking Under the Hood: Canadian Equity Concentration and Diversification | EP 218

Canada's stock market has set repeated record highs in 2026, even as the domestic economy feels soft. Canadian equity portfolio manager Mark Rutherford explains the gap between the two, and why a large weight in financials can represent more diversification rather than less. He walks through how the team rotated within the sector as the banks re-rated, and the discipline behind trimming a gold position that had run. As indexes themselves have grown more concentrated, the conversation lands on a simple idea: knowing what you own matters more than ever. Key takeaways • The Canadian market and the Canadian economy can tell very different stories. Commodities and financials drive a large share of corporate earnings even though relatively few people work in those sectors, which helps explain record markets alongside near-zero real growth. • A large weight in financials is not a single bet. Beneath the label sit banks, life, property and casualty insurers, alternative asset managers, and exchanges, each with its own return drivers and correlations. • Position weights reflect what has worked, but they are not fixed. As the banks re-rated from roughly 10 to 12 times earnings toward 15 to 16 times, the team recycled capital into property and casualty insurers and alternative asset managers offering more attractive returns. • Gold earns its place through company economics, not a price forecast. Royalty businesses and selected miners were added for their free cash flow and differentiated correlation, then trimmed as the combined weight grew and the rate and inflation backdrop shifted. • Trimming winners is as much a part of the discipline as finding them. Allowing any single position or exposure to grow unchecked introduces risk that has nothing to do with the original thesis. • Indexes have become increasingly concentrated vehicles. Knowing what you own, and holding exposures by deliberate choice rather than by default, can be key to real diversification. Host: Andrew Johnson, CFA Institutional Portfolio Manager Guest: Mark Rutherford, CFA Portfolio Manager This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit us at: https://www.youtube.com/@MawerInvestment [https://www.youtube.com/@MawerInvestment] https://www.mawer.com [https://www.mawer.com] https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/] #ArtOfBoring #MawerInvestmentManagement #MawerInvestment #Podcasts

Balanced Portfolios: A Market Tug of War and the Discipline to Stay Neutral | EP 217

In this episode, portfolio manager Steven Visscher covers how Mawer's balanced portfolios navigated 2025 and how they are positioned in 2026. With a war-driven energy shock on one side and an AI investment boom on the other, the market is pulling in two directions at once. Steven walks through what that means for asset mix, where the team is seeing signs of investor complacency, and why cracks in private credit could soon create a meaningful opportunity. Key Takeaways: * Two forces are competing for market direction in 2026: a war-driven energy shock from the conflict in Iran pushing inflation and rates higher, and a broadening AI investment boom driving strong earnings momentum across the global economy. * AI capital investment has expanded well beyond the hyperscalers to include memory, storage, cooling, data centres, and electrical grid infrastructure, with more than 80% of S&P 500 Q1 reporters beating earnings expectations. * Current positioning remains close to neutral at 60% equity, with a continued underweight to U.S. equities in favour of international and emerging markets. Valuations, interest rates, and investor psychology all support staying close to that neutral stance. * Cracks in private credit are emerging through rising defaults and client redemption gating. The team is building global credit exposure gradually and is prepared to deploy capital more aggressively when a dislocation occurs. * In an environment of competing forces and mixed signals, staying diversified, maintaining valuation discipline, and building portfolios that can withstand multiple scenarios remains the priority. Host: Andrew Johnson, CFA Institutional Portfolio Manager Guest: Steven Visscher, CFA Investment Counsellor This episode is available for download anywhere you get your podcasts. Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. Visit Mawer at https://www.mawer.com [https://www.mawer.com/]. Follow us on social: LinkedIn - https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] Instagram - https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/]

U.S. Mid-Cap: The Physical Economy Comeback, Capital Intensity, and Portfolio Positioning | EP 216

In this episode, Jeff Mo, U.S. mid-cap portfolio manager, explores a fundamental shift in how economies may grow over the next decade. He makes the case that after 25 years of intangible, internet-driven expansion, growth may increasingly depend on building physical things again: data centers, electrical infrastructure, factories, defense systems, satellites. Jeff walks through the forces driving this transition, from AI's voracious appetite for capital to geopolitical tensions reshaping supply chains and defense spending. The conversation examines how these macro themes connect to bottom-up stock selection, where the U.S. mid-cap team is finding opportunities today, and why maintaining inherent contradictions in the portfolio remains essential even as thematic investing dominates market behavior. • Why producing one unit of GDP today requires about a third as much oil as in the 1970s, yet capital expenditure per unit of GDP growth may be rising as the economy shifts from intangible services back toward physical infrastructure and manufacturing. • How AI data center buildouts, reshoring of manufacturing, rising defense budgets, and the expanding space economy are all driving higher demand for physical capital, commodities, and industrial capacity after a decade of underinvestment. • How the hyperscalers (Google, Amazon, Microsoft, Meta) are moving from massive net cash positions to net debt as they fund AI infrastructure, tightening capital availability for the rest of the economy and potentially raising interest rates and dampening consumer spending. • Where the U.S. mid-cap team is finding opportunities aligned with these themes, from companies like Northrop Grumman, SanDisk, and OSI Systems, while maintaining portfolio balance through inherent contradictions. • Why humility matters most when contemplating big-picture themes: the goal isn't predicting the future but building a diversified portfolio of wealth-creating companies that can withstand multiple scenarios. [00:00] Introduction: From Intangible to Physical Economy [00:50] Opening Discussion with Jeff Moe [01:42] Oil Efficiency vs. Rising CapEx Requirements [03:39] Economic Growth: Labor, Capital, and Productivity [04:11] Infrastructure Investment and Reshoring Trends [06:52] Defense Spending and Capital Intensity [07:08] The Space Economy: Satellites and Connectivity [11:00] Memory Market Dynamics and Contract Changes [12:22] Cyclicality in a Capital-Intensive Economy [15:04] Consumption vs. Investment: Portfolio Implications [17:44] Connecting Themes to Bottom-Up Research [18:44] Idea Generation and Stock Selection Process [21:32] Winners and Losers: The Bits to Atoms Trade [22:00] Portfolio Construction: Inherent Contradictions [25:21] Where the Theme Might Be Wrong [26:09] Long-Term Wealth Creation and Economic Optimism [28:18] Closing and Subscription Information Host: Rob Campbell, CFA Institutional Portfolio Manager Guest: Jeff Mo, CFA Portfolio Manager This episode is available for download anywhere you get your podcasts. Visit us at: https://www.youtube.com/@MawerInvestment [https://www.youtube.com/@MawerInvestment] https://www.mawer.com [https://www.mawer.com] https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/] Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore. #ArtOfBoring #MawerInvestmentManagement #MawerInvestment #Podcasts #capitalmarkets #geopoliticalinvesting #commodityMarkets #capitalexpenditure #physicalEconomy #GDPGrowth

International Equity: Finding Quality Opportunities in Today's Market | EP.215

In this episode, Peter Lampert, international equity portfolio manager, examines the Middle East conflict and its implications for global markets. He walks through the portfolio's diversification strategy, explains the team's nearly 40-year history with Shell, and explores how a changing market backdrop has challenged traditional definitions of quality and why forward-looking analysis may matter more than historical patterns. * How the Middle East conflict and the Strait of Hormuz blockade are affecting oil and LNG flows, and why equity markets have largely looked through the disruption so far. * The portfolio's diversification strategy, balancing energy importers like TSMC with energy producers like Shell to create resilience across different scenarios. * Why the team exited Shell in 2015 during the commodity boom, and what changed to make it attractive again when they reinitiated the position in 2022. * How the traditional quality factor has underperformed over the last five years as interest rates and commodity prices rose, rotating investor interest away from high-quality growth companies. * Why forward-looking analysis is critical—finding wealth-creating companies that don't fit the conventional quality mold, like European defense companies and Korean memory producers benefiting from AI demand. 0:00 Introduction & Episode Overview 0:27 Disclaimer 0:44 Middle East Conflict and Market Implications 1:13 Strait of Hormuz Blockade and Energy Disruption 2:10 Key Risks: Oil, LNG, and Infrastructure Damage 3:30 Portfolio Positioning and Energy Exposure 4:39 Case Study: How TSMC Manages Energy Risk 6:42 Portfolio Diversification Strategy 7:27 Balancing Energy Importers and Producers 8:37 Shell: A 40-Year Investment History 10:35 Quality Factor Underperformance 11:00 Redefining Quality in Changing Markets 14:41 Final Thoughts: Long-Term Perspective 15:19 Closing Remarks and Subscribe Host Info: Rob Campbell, CFA Institutional Portfolio Manager Peter Lampert, CFA Portfolio Manager Visit us at: https://www.youtube.com/@MawerInvestment [https://www.youtube.com/@MawerInvestment] https://www.mawer.com [https://www.mawer.com/] https://www.linkedin.com/company/mawer-investment-management/ [https://www.linkedin.com/company/mawer-investment-management/] https://www.instagram.com/mawerinvestmentmanagement/ [https://www.instagram.com/mawerinvestmentmanagement/] #ArtOfBoring #MawerInvestmentManagement #Podcasts #BeBoringMakeMoney