The ebb and flow of public markets

A Q&A with George Maris, post 2024 Milken Global Conference

May 23, 2024 | 4 min read
George Maris, CFA
Chief Investment Officer, Global Equities

Chief Investment Officer and Global Head of Equities George Maris attended the 2024 Milken Global Conference, where he spoke on a panel about the significant shifts happening in capital markets as liquidity wanes, capital costs rise, and new technologies add another layer of complexity. Along with a panel of esteemed peers, George discussed his views on artificial intelligence (AI), where he sees opportunity, his views on the investment prospects in China, and the quality he’s looking for when hiring future investors.

With so many investors moving into the private markets, what are your views on public markets and, more specifically, equities?

Even after ten years of a massive bull market in public equities, like Rodney Dangerfield, the asset class still gets no respect. There is incredible innovation happening secularly which is represented across public markets, making it an exciting area in which investors should consider deploying capital, particularly from a global perspective. The trend of private equity firms acquiring publicly-listed companies only magnifies the opportunities in public equities.

How is Principal Asset Management approaching AI and the tech “revolution” we are currently in?

AI opportunities are indeed multifaceted, presenting both real opportunities and real risks. Use cases for AI continue to evolve, and it’s reasonable to expect a heightened pace of usage as innovation continues to expand. The evolution of AI likely further reinforces the advantages of current large-scale players, given the massive upfront investments required. Unlike during the dot-com bubble, these large-scale firms are highly profitable and possess cash rich balance sheets, allowing them to massively out-invest their peers. This creates further scale and monopolistic advantages to already dominant firms.

Simultaneously, AI presents competitive disintermediation opportunities for non-traditional players. The technology offers a multidimensional perspective of further scaling the largest players while providing opportunities for new entrants to disrupt existing practices. This potential for disruption requires examining the potential for traditional players to be disintermediated. From an investment perspective, there is opportunity and risk across the lateral spectrum.

Technological developments in the AI space raised the issue of national interest protection, with countries wanting to keep their technologies within their borders. Does that complicate your investment thesis?

My initial perspective is that AI will require a cross-border perspective as the value chain supporting high-end compute technology is global. However, the security interests involved with advanced technology will require an added dimension in assessing opportunities. Consider the agreements of the U.S., Japan, Taiwan and the Netherlands to restrict the deployment of high-end semiconductor capital equipment to China. Why the Netherlands and why Taiwan? ASML and Taiwan Semiconductor Manufacturing Company are critical enablers of the most advanced computing, indicating investors should expect geopolitics to play a part in the future of high-end computing and AI space.

Staying international, what are your views on China?

China is currently a compelling investor opportunity. While negativity toward China reached extreme levels, many current concerns, such as geopolitical tensions and regulatory uncertainty, impacted investments there for quite some time.

Despite China trading as cheaply as ever, there is still an incredible amount of innovation and growth happening. Additionally, the Chinese economy is supported by a more supportive regulatory environment and an increasingly pro-business stance from the government. We are also witnessing companies act more shareholder friendly, including initiating buybacks, increasing dividends and acting with a shareholder return thoughtfulness that marks a turn from prior engagement.

Are there any other overarching or industry-specific themes outside of AI and tech that you’re paying particular attention to?

AI is one of the many ways innovation is currently occurring. Another area of interest, despite being an old school sector, is commodity mining. Until recently, this was an overlooked area of opportunity.

Take copper, for example. The global economy needs copper for electrification and industrialization. During the prior decade, mining development was negatively impacted as capital expenditures were dramatically reduced due to a deep and prolonged bear market.

The world has underinvested in commodities for over a decade and now desperately needs a growing supply to support the needs of an advancing global economy. Unfortunately, the ability to expand materials supply is constrained. As an example, assuming a company can get permitted for a copper mine—a difficult task in the current global regulatory environment—it may take five years to expand a current mine and upwards of 10 years to start from scratch.

When looking at commodity mining, the key is to note the dearth in supply, which is only likely to worsen over the next few years. As investors, duration is on our side: every year that goes by the quality of supply degrades as the best quality is generally pulled out first and less supply is available as mines are finite and get depleted. So, with the world short on commodities like copper, there are attractive long-term opportunities for investors.

And finally, a question about the team you are building at Principal Asset Management. What is one quality you look for when hiring the next generation of talent?

Persistence. The unwavering determination to continue digging for answers and the resilience to persevere during challenging periods is essential for successful long-term investing. I found that investors who commit to overcoming obstacles and achieving goals despite potential setbacks often also have superior problem-solving skills, adaptability, and remain steadfast in their dedication to continuous improvement— all of which are critical to developing and managing superior equity portfolios.

To watch George’s entire panel at the 2024 Milken Global Conference, click here to access the replay.

Equities
Macro views
Disclosure

For Public Distribution in the U.S. For Institutional, Professional, Qualified and/or Wholesale Investor Use Only in other Permitted Jurisdictions as defined by local laws and regulations.

Risk Considerations
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results and should not be relied upon to make an investment decision. Equity markets are subject to many factors, including economic conditions, government regulations, market sentiment, local and international political events, and environmental and technological issues that may impact return and volatility. International investing involves greater risks such as currency fluctuations, political/social instability, and differing accounting standards. Risk is magnified in emerging markets, which may lack established legal, political, business, or social structures to support securities markets.

Important information
This material covers general information only and does not take account of any investor’s investment objectives or financial situation and should not be construed as specific investment advice, a recommendation, or be relied on in any way as a guarantee, promise, forecast or prediction of future events regarding an investment or the markets in general. The opinions and predictions expressed are subject to change without prior notice. The information presented has been derived from sources believed to be accurate; however, we do not independently verify or guarantee its accuracy or validity. Any reference to a specific investment or security does not constitute a recommendation to buy, sell, or hold such investment or security, nor an indication that the investment manager or its affiliates has recommended a specific security for any client account.

All figures shown in this document are in U.S. dollars unless otherwise noted.

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

This material is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.

This document is issued in:

  • The United States by Principal Global Investors, LLC, which is regulated by the U.S. Securities and Exchange Commission.
  • Europe by Principal Global Investors (Ireland) Limited, 70 Sir John Rogerson’s Quay, Dublin 2, D02 R296, Ireland. Principal Global Investors (Ireland) Limited is regulated by the Central Bank of Ireland. Clients that do not directly contract with Principal Global Investors (Europe) Limited (“PGIE”) or Principal Global Investors (Ireland) Limited (“PGII”) will not benefit from the protections offered by the rules and regulations of the Financial Conduct Authority or the Central Bank of Ireland, including those enacted under MiFID II. Further, where clients do contract with PGIE or PGII, PGIE or PGII may delegate management authority to affiliates that are not authorised and regulated within Europe and in any such case, the client may not benefit from all protections offered by the rules and regulations of the Financial Conduct Authority, or the Central Bank of Ireland. In Europe, this document is directed exclusively at Professional Clients and Eligible Counterparties and should not be relied upon by Retail Clients (all as defined by the MiFID).
  • United Kingdom by Principal Global Investors (Europe) Limited, Level 1, 1 Wood Street, London, EC2V 7 JB, registered in England, No. 03819986, which is authorized and regulated by the Financial Conduct Authority (“FCA”).
  • United Arab Emirates by Principal Global Investors LLC, a branch registered in the Dubai International Financial Centre and authorized by the Dubai Financial Services Authority as a representative office and is delivered on an individual basis to the recipient and should not be passed on or otherwise distributed by the recipient to any other person or organisation.
  • Singapore by Principal Global Investors (Singapore) Limited (ACRA Reg. No. 199603735H), which is regulated by the Monetary Authority of Singapore and is directed exclusively at institutional investors as defined by the Securities and Futures Act 2001. This advertisement or publication has not been reviewed by the Monetary Authority of Singapore.
  • Australia by Principal Global Investors (Australia) Limited (ABN 45 102 488 068, AFS Licence No. 225385), which is regulated by the Australian Securities and Investments Commission and is only directed at wholesale clients as defined under Corporations Act 2001.
  • This document is marketing material and is issued in Switzerland by Principal Global Investors (Switzerland) GmbH.
  • Hong Kong SAR (China) by Principal Asset Management Company (Asia) Limited, which is regulated by the Securities and Futures Commission. This document has not been reviewed by the Securities and Futures Commission.
  • Other APAC Countries/Jurisdictions, this material is issued for institutional investors only (or professional/sophisticated/qualified investors, as such term may apply in local jurisdictions) and is delivered on an individual basis to the recipient and should not be passed on, used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.

Principal Funds are distributed by Principal Funds Distributor, Inc.

© 2024 Principal Financial Services, Inc. Principal®, Principal Financial Group®, Principal Asset Management, and Principal and the logomark design are registered trademarks and service marks of Principal Financial Services, Inc., a Principal Financial Group company, in various countries around the world and may be used only with the permission of Principal Financial Services, Inc. Principal Asset Management℠ is a trade name of Principal Global Investors, LLC.

3592469

Related Insights

About the author