Paul Markham, Investment Director, Global Equities, talks to GAM’s Head of UK Distribution Steven Williams on how he defines disruption and the fact it can have an impact across all sectors and industries, with technology an enabler of that disruption rather than necessarily being the business of the companies in which he invests.
24 April 2025
Steven Williams: Paul, can we start by talking about how you and the team define disruptive?
Paul Markham: Yes, when we joined GAM, we took the strategy and we decided to take a step back and to really redefine for our own purposes and also for a wider commercial purpose what disruption really means and how it can be enacted in the portfolio. What we concluded was that disruption is where a business model or a part of a business model is really upending the way that things have been done traditionally by existing players within an industry or business and that means that can be via pricing or it can be via the use of technology, it can be via the proposed client base. All of those things that make a business a bit different and make it likely to really change the way in which its competitors and peers do business going forward.
SW: So just probing a little bit further into that Paul, what is it that you're looking to identify within the companies that you hold in the portfolio?
PM: Well firstly, clearly the disruptive element of what they do is crucially important. I think it would be fair to say that we can take an aspect of a company and see it as disruptive. I think if we wanted every portfolio to be fully disruptive, I think we'd have a very, very small universe of stocks. So in that sense, we have to take a view as to whether the disruption is material. But once we've identified that through our themes, we then really try to dig into the fundamentals and the valuation of the companies in question. We want to see financial strength, we want to see the barriers to entry which make the competitive landscape attractive and compelling for that company, and also of course the valuation.
SW: And some investors might think that disruptive is code for tech or even high beta plays. Is that fair or are you doing something different?
PM: We're certainly not beta managers and we would much prefer to generate alpha than beta and I think one doesn't equal the other, as most people watching I'm sure will know. We do certainly want to use disruption as a differentiator for the kind of stocks which we own. Technology is an enabler of that disruption but it doesn't necessarily mean that the companies in the portfolio will all be direct plays on technology. So I think in the world that we live in, it's hard to escape the idea that technology will be a crucial part of the ability to disrupt. But it won't necessarily be the sole business line or the sole driver of the kinds of business model which we find attractive.
SW: And with that in mind, what are the objectives? What are you looking to achieve within the disruptive growth strategy?
PM: Well, the reference performance benchmark for the strategy is the MSCI World Growth Index. We will look to outperform that by 3% annualised on a long-term basis. We will allow ourselves a risk budget of approximately 4% to 8% in terms of tracking error to achieve that. So we do hope to be able to achieve significant outperformance of markets but with very much an eye on the risk management of the investments in the portfolio at the same time.
SW: You touched on tracking error and you mentioned risk at the end. But if I can just get a little bit more clarity on that. How do you think about risk within the portfolio?
PM: I think the most fundamental management of risk applies to the actual companies held in the portfolio. What kind of risks do their balance sheets, do their businesses, do their managements, do their wider competitive landscape pose to them? And I think that's the most basic and fundamental and important aspect of managing risk. We also believe that in order to be able to be away from the benchmark, we need to know what it is. So it's all very well holding a big position or a big absolute holding in a name without knowing what it is on the benchmark and being overweighted to that.
So that's something which we do keep an eye on. We also make sure that there is diversification from a currency, from a geographical exposure and from a sectoral perspective. And all of those go, we think, to making the degree of tracking error or the degree, in other words, of relative volatility away from the target benchmark as being appropriate for the kind of outperformance target which we're seeking to achieve.
SW: Paul, thank you very much for your time.
Paul Markham manages Global Equity and Disruptive Growth strategies at GAM Investments.
Important disclosures and information
The information contained herein is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained herein may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information contained herein. Past performance is no indicator of current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice or an invitation to invest in any GAM product or strategy. Reference to a security is not a recommendation to buy or sell that security. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented. The securities included are not necessarily held by any portfolio nor represent any recommendations by the portfolio managers nor a guarantee that objectives will be realized.
The MSCI World Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 23 Developed Markets countries. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and long-term historical EPS growth trend and long-term historical sales per share growth trend.
This material contains forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of GAM or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.
The information contained herein is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained herein may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information contained herein. Past performance is no indicator of current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice or an invitation to invest in any GAM product or strategy. Reference to a security is not a recommendation to buy or sell that security. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented. The securities included are not necessarily held by any portfolio nor represent any recommendations by the portfolio managers nor a guarantee that objectives will be realized.
The MSCI World Growth Index captures large and mid cap securities exhibiting overall growth style characteristics across 23 Developed Markets countries. The growth investment style characteristics for index construction are defined using five variables: long-term forward EPS growth rate, short-term forward EPS growth rate, current internal growth rate and long-term historical EPS growth trend and long-term historical sales per share growth trend.
This material contains forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of GAM or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.