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About this podcast

Dave is joined by Dominic Wallington, Senior Portfolio Manager & Head of European Equities, RBC Global Asset Management (UK) Limited, to discuss the pandemic’s recent surge across Europe, and the current and future impact on markets. Dominic also shares his insights into health-related research, particularly focusing on the relationship between COVID-19 and other diseases. [10 minutes, 09 seconds] (Recorded October 29, 2020)


Hello and welcome to The Download. I’m your host, Dave Richardson, and I’m really pleased to be joined today by my very good friend, Dominic Wallington, who is the head of European Equities with, RBC Global Asset Management (UK) Limited coming to us from London today. Dominic, welcome to the podcast.

Hi, Dave, nice to speak to you.

So, Dominic, a lot in the news here in Canada about the resurgence of COVID-19 across Europe, and I thought I’d check in with you and see from an investment perspective how you see the ongoing or perhaps the second wave of the pandemic in Europe impact-ing the European economy and thus investments in Europe, from your perspective.

Yes, so we’ve never suggested that we could predict what was going to happen, but I remember speaking earlier in the year and hoping that the first wave was well con-trolled. Obviously looking at other pandemics, you often get more than one wave. So there was always the risk. But at the time, I remember suggesting that, in fact, if this initial wave was controlled, maybe we’d be OK and there wouldn’t be too many cultural implica-tions. But obviously there is growing unease in Europe. France has more or less entered a second lockdown. Germany is close to that. There are areas of the U.K. where a very simi-lar sort of thing is happening mostly in the north of the country. It looks like within the U.K. it could develop into a national lockdown. So this is not good for the broader econo-my. It’s obviously very negative, especially for those industries where there is entertain-ment, where there’s lots of intermingling, whether that be bars and restaurants or music venues, those sorts of things are going to really suffer. What I can say is that obviously the technology that we have that’s available now is remarkable in terms of allowing us to work from home. This wouldn’t have been possible ten years ago. So the technology is helping us, and it is also helping us from a medical perspective. But there is a degree of concern, I have to admit, Dave, in terms of what’s happening, especially given that we’re coming up to winter and the implications for broader economies.

Now, your approach to investing, if I could summarize it and please correct me after I’ve done my best effort to summarize it, relies a lot on looking at interesting trends and themes and focusing on established brands, high quality companies that have proven over decades, if not centuries, that they have a sustainable business model. From your perspec-tive, how have these companies fared through the pandemic? Is it almost a case where people might think that these companies might struggle but in fact, in many ways, the strength of these brands and the strength of these businesses have even been enhanced by what’s been happening with the pandemic?

Yes, I think that this second point is true. The stability of these types of busi-nesses has been thrown into relief against those industries that are really suffering at the moment. And unfortunately, many of those industries were at the epicenter of fundamen-tal change anyway. If you look at the retailing sector, obviously dramatically impacted by falling footfall, it was also being disintermediated by online retailers. So that was sort of a double whammy there. We tend to seek higher though. We don’t really have that much exposure to those sorts of companies. We invest in companies that make the products that are branded, and these can be within the food industry. That’s obviously been a very stable area. In fact, some of the indulgent food products like ice cream, I’ve seen a dra-matic uptick as people have been essentially finding comfort in indulgent foods and other sorts of brands that we invest in. They are now being sold directly to the consumer over the Internet as opposed to through retail outlets. So they’ve circumvented much of the really substantial impact of COVID-19 and will probably continue to do so. Then across the piece, we have exposure to a number of high intellectual property, industrial companies and pharmaceutical companies. For the most part, they all tend to be really very stable. Part of this is that many of them sell to Southeast Asia and Southeast Asia still appears to have dealt really very well with Covid-19. Not many of them are dramatically exposed to Europe itself.

Well, I can tell you, Dominic, one of the reasons why I like to do a podcast instead of something on video is, I’ve been one of those consumers of those indulgent goods. But if I could indulge you, because we don’t get the opportunity to connect as much as I’d like, to go a little bit longer with this. I know the focus from a health perspective has been on Covid-19, but for a very long time you have looked at other health crises, so to speak, that are trends all around the world and particularly diabetes. We were speaking earlier about some of the interesting connections between diabetes and COVID. From a different per-spective, that diabetes creates co-morbidity issues with COVID. But maybe you could talk about some of the research that you’ve seen around diabetes and COVID-19 or diabetes and just general health.

Yes, it’s fascinating. So I think there’s a general consensus of opinion that we’re getting heavier pretty much everywhere globally, and we think this is very related to the huge uptick, the huge growth that we’ve seen within diabetes, that the two are intimately connected and the initial health problem that people suffer from is called metabolic syn-drome. It basically means that their metabolism is suffering in one way, shape or form. We think there’s a huge cascade of different illnesses, many of them considered to be the onuses of modern civilization, if you will, that come from metabolic syndrome. But one of the areas that is fascinating is the level of obesity which is creeping up. It would appear that Covid-19 actually gains access to the body’s cells using a hormone that’s expressed by fat. Fat is not dormant. It’s actually an active organ. So the more fat in the body, the more of this hormone is expressed and the easier it is for Covid-19 to get access on a solider ba-sis, which is quite scary and quite remarkable as well, at the same time. This adaptation to a changing health profile within the human population appears to be a precursor to this pandemic. So we’re watching this very carefully. As you say, we’ve invested in diabetes care, but the companies that we invested in, Nova Nordisk, has understood this connec-tion between these different pathologies. It’s been attacking obesity as well as diabetes. So we hope that it’s helping. It’s a terrible thing to see what’s developing, but if something productive comes out of it and there’s a commercial aspect to it, then all is well and good, I suppose.

Yes. Again, really always interesting catching up with you. Just again, an example: one of the things I love about bringing this podcast to Canadians is the opportunity to in-troduce them to investment professionals such as yourself. I think the hallmark of great investors is what I characterize as an intellectual curiosity, that you’re always looking and reading and trying to identify things that are going to change the world and that you need to get in front of from an investment perspective. You’re one of the most curious people I’ve ever met. It’s great to have you on in the midst of everything that’s going on here in 2020. So, Dominic, I hope you and your family are healthy and well. I really want to thank you for your time today.

Thank you very much, Dave. The same to you and your family.

Thank you.


Recorded October 29, 2020

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