I've doubled investors' money in five years. Here's what Trump's tariffs mean for them

Telegraph

06-05-2025

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Charles Bond, manager of the Invesco Global Emerging Markets fund, believes professional investing is akin to amateur tennis. The key, he says, is to limit the 'losers' in your portfolio in the same way the winning player makes the least unforced errors.
That theory has been put to the test in recent weeks, as Donald Trump's 'Liberation Day' tariff announcements upended markets. Although on temporary pause, the universal tariff rate of 10pc, with some nations facing rates of more than 50pc, has forced a reset of investor theories – and China's 145pc remains in place.
In Mr Bond's opinion, these tariffs will hit American companies the hardest and will inevitably mean higher prices, which would be a large unforced error.
The team's investment approach has paid off for the fund over the years, which Mr Bond co-manages with Ian Hargreaves, Matthew Pigott and William Lam. In the five years to the end of March, the fund had returned 95pc, compared with the peer average of 44pc, although this has since been dented slightly by the tariff turmoil.
How do you invest?
We are contrarian investors, which means we buy shares that are going down or have gone down. We think you find the best investment ideas when there is pessimism and that is best expressed by a falling share price.
How are companies in your portfolio affected by American tariffs?
The honest answer is we have to wait and see what the tariff rates are. One thing I expect to see is a slowdown in capital expenditure because most companies will think an inevitable consequence of the tariff discussion is that demand will be weaker in the long run.
That is bad for economic growth generally, and it may end up being more impactful than the tariff announcements themselves.
So far, we have spoken to several companies that look particularly exposed to tariffs. They include a Chinese auto parts supplier and a Hong Kong-listed shoe manufacturer, which both have a large proportion of their products going into the US.
There is some scope for the auto parts manufacturer to realign supply chains, but this set of new tariffs makes that harder because they are more evenly spread around the world.
How are you navigating recent market volatility?
We have done almost nothing, which is our normal course of action in these sorts of situations. We are long-term investors, and the stock market is prone to overreacting on the upside and the downside.
It is hard for us to know what this all means fundamentally for earnings – I feel confident that it will be negative for earnings, but the question is how negative and whether the stock market has already taken that into account.
We would prefer to wait and see, and then make [investment] decisions in our own time when things are less volatile. Having said that, if there is a continued sell-off, we are thinking about what we could buy because there are lots of companies in emerging markets that are already trading on really low multiples with good balance sheets.
What do American tariffs mean for the global economy?
Our main takeaway is this could be worse for America than it is for anywhere else. Tariffs will mean higher prices for American consumers, which could ultimately lead to a recession.
This would make everybody poorer and mark a departure from the economic orthodoxy of the past 40 years. I don't see that as a good thing.
What is your outlook for the Chinese economy?
What the Chinese government is doing is gradual and piecemeal. They don't want to repeat the mistakes of the financial crisis when there was an enormous explosion of fiscal spending and economic support, which led to wasted capital allocation and corruption.
They are being more deliberate about how they allocate capital, which is sensible. The Chinese government appears to have held back support to keep some dry powder in case trade relations with the US continue to deteriorate.
I think the economy is gradually turning a corner. It takes a long time to reinstate confidence in the consumer after they have suffered losses in their most valuable asset: property.
We are starting to see green shoots, particularly revenue growth in e-commerce companies, where consumers are getting a subsidy to trade in old white goods, for example, to replace them with new ones. Some policies are starting to generate some growth. In the property market, it is just a passage of time – the weak developers need to go out of business.
What has been your best investment?
MediaTek's shares are up 250pc over the past five years, and we have received another 130pc in dividends. It is a classic example of buying a stock where expectations were low.
We have since benefited from a massive change in the earnings power of the business, and it has performed far better than anyone expected.
And your worst?
We own two stocks in the Indonesian cement industry – Indocement and Semen Indonesia – which have been very bad investments because cement demand has been very weak, much weaker than we thought. I think we have lost around 50pc to 60pc of our money on these two stocks.
We still own them because, today, the value of these companies is less than half of what it would cost to build their assets. There is no capital going into the industry at all, so it is only a matter of time before returns on capital recover because of the lack of capital going in.
Is the ratio of stocks you typically get right versus wrong 60:40?
If I get 60pc right, I would be a very happy man. There are different types of investor. For example, some say they have a lower hit rate, but the ones they get right are such big winners it pays for all the losers.
That's not us. We think professional investing is akin to amateur tennis. Typically, the winner of an amateur tennis match is the person who hits the fewest unforced errors, not the person who hits the most winners.
We are trying to be defensive investors, which means limiting our losers. This is why we are valuation-driven and systematic about our process. Our hit rate is probably between 50pc and 60pc, but I would like to think our winners add more to the portfolio versus how much the losers take away. It is a game of averages basically.