A Quality Focus for an Uncertain World

Global markets have faced renewed turbulence in recent months. Just as investors began adjusting to the post-pandemic economic landscape, fresh disruptions have emerged—most notably, a sharp escalation in trade tensions triggered by new U.S. tariff policies. This has reignited fears of a global trade war, amplifying volatility across asset classes. The S&P 500, for example, fell 10% over just two trading sessions in early April, underscoring how fragile market sentiment has become.

At the same time, mounting concerns over the U.S. fiscal outlook have raised questions about the dollar’s long-term status as the world’s reserve currency. Long-dated government bond yields have surged, with the 20-year U.S. Treasury yield breaching 5%, a stark contrast to the 1% levels seen at the onset of the pandemic. Yields in the UK and elsewhere have followed a similar trajectory, reflecting widespread investor anxiety around sovereign debt sustainability.

Inflation risks, too, are resurfacing—fuelled by tariffs and the potential for renewed supply chain disruption. While inflation appeared to be moderating in the latter half of 2024, the spectre of protectionism could push input costs higher and disrupt global trade once again.

In such conditions, the natural question arises: Where can investors find resilience?

Historically, high-quality investments have provided a buffer during turbulent periods. Companies with strong balance sheets, reliable earnings, and durable competitive advantages tend to weather downturns better and often emerge stronger.

This is the essence of quality investing: identifying exceptional businesses and holding them for the long term. Historically, equity managers were primarily categorised as either growth or value oriented. Today, quality investing has emerged as a distinct and effective approach embraced by many global asset managers. Although market narratives shift, the core characteristics of quality—financial strength, operational resilience, and sound governance—offer a rare source of stability in an unpredictable world. 

At Marriott, we believe a disciplined, quality-focused strategy is particularly well-suited to today’s environment. That’s why we’ve launched the Smart International Equity Portfolio, a globally diversified solution designed to give investors access to the worlds’ best quality-focused active and passive funds with subtle but important differences to improve risk adjusted outcomes.

The Smart International Equity Portfolio:

• Focuses on high-quality businesses with strong balance sheets, established brands, and consistent earnings—traits that support above-average, risk-adjusted returns.
• Provides access to globally recognised active managers, including the Fundsmith Equity Fund and the Dodge & Cox U.S. Stock Fund—broadening offshore opportunities available to South African investors.
• Blends active and passive strategies, incorporating low-cost options like the iShares Core S&P 500 ETF to enhance efficiency.
• Diversifies across managers, sectors, and geographies, helping to manage risk and capture global opportunities.
• Offers tax efficiency, with all underlying investments held in UK-domiciled funds in situs-free jurisdictions. By selecting accumulating share classes, investors can compound dividends tax-free, with gains taxed as capital gains rather than income upon repurchase.

For long-term investors, the Smart International Equity Portfolio offers a compelling approach to building wealth through quality. While well-positioned for any environment, this strategy is particularly relevant in today’s climate of geopolitical and economic uncertainty.

The Smart International Equity Portfolio (SIEP) can be accessed via Marriott’s International Investment Mandate (using your annual individual offshore allowance).

This article was written by Scott Cooper an Investment Professional at Marriott Investment Managers.