Dubai: In this low growth and low rate environment, and with market volatility picking up, fund managers like Columbia Threadneedle are resorting defensive play.

After the initial period of coordinated actions by central banks, the US Federal Reserve was the first one to diverge, with a rate rise last year, and easy money policy still being continued by the Bank of Japan, the European Central Bank and the Bank of England.

The central banks’ actions have not met desired results. Growth has been sloppy in Europe, and also in Japan, and also inflation is nowhere near the required level. This including other factors such as Brexit, US presidential elections, ongoing concerns on China is making Harvie edgy.

“We don’t know how sustainable this [easy money policy] is. And the problem is further you go down the route without stimulating growth, the less you have in terms of ammunition for dealing with problems,” Andrew Harvie, client portfolio manager with Columbia Threadneedle Investments, who helps manage $12 billion (Dh44 billion) in equities, told Gulf News on his client visit to Dubai.

The asset management firm, which manages about $461 billion of client’s money, is looking for companies, which are more resilient, cash rich, with good dividend history, and which can weather the central banks actions or mis-actions.

Resilient

Harvie along with his other fund managers are spending most of their time in finding out defensive companies, which are resilient, cash rich, and would be able to weather this low growth and low rate environment.

“We are looking for those companies that are not necessarily driven up through false investor sentiment through easy money policy or investor sentiment based on rebound in commodity prices. We are looking at companies that could weather this kind of low interest rate and low growth environment,” said Harvie.

Columbia sees good opportunities in the US, which has adopted a different monetary stance, and is leading in terms of economic growth. The asset manager has more than 60 per cent of its equity investments there.

Columbia Threadneddle likes businesses in an industry that is relatively consolidated, good level of market share, and significant barriers to entry.

“There are a few themes we are looking broadly across the global desk. One idea is that consumer confidence has come back to a relatively small degree.

There are a few consumer focused companies that would benefit from more disposable incomes with consumers. Those kinds of companies are with defensive consumer growth types, where you have good recurring revenue stream, and good predictable cash flow, with good dividend history,” Harvie said.

Broadly Harvie likes technology, and also likes the idea of monetisation of advertising spends. Recently, Alphabet and Facebook started to monetise ad spends on mobile devices.

The asset manager also likes MasterCard or Visa, which has competitive advantage in an industry that remains fairly resilient in the broader macro picture.

Avoid

Overall, Columbia Threadneddle is underweight in Japan. Diversified financials, and banks are out of favour for them. It has a small overweight on the UK equities.

“We tend to avoid companies in fast moving technology sectors in favour of established players. It’s certainly a bit of a challenge to find companies with this profile,” Harvie said, adding, “we have reduced our exposure to the health care or biotech companies.”

Columbia is also underweight on energy companies.

“We are seeing a recovery in oil price. But there is a considerable volatility there, We don’t want to invest in exploration companies. For us, an attractive energy company would be the one which has long life reserves, with limited need for exploration, and low marginal cost of production,” Harvie said.

Oil prices have tumbled from over $100 per barrel a few years ago due to a global supply glut. Though the prices have recovered more than 60 per cent from its lowest level in 12 years seen in January 2016.

Bullish on India

For Columbia Threadneedle, India stands out as one of the most attractive emerging market.

“We are bullish on India, it is one of the economies in the world which has good economic and wealth growth,” said Harvie, adding “Indian nationals have money to spend, so we like how that spill over into banking sector.”

In addition to the wealth generation, India has also increased its infrastructure spending, improved its current account position, removed fuel subsidies, and has a healthy fiscal standing.

Coumbia Threadneedle Investments has a few Indian stocks in their portfolio. Its focused strategy has 6 per cent in HDFC and Asian Paints, which commands over 50 per cent market share.