Global equities: Power shift brings new investment opportunities

As the world undergoes a massive power shift, Pendal Global Select Fund co-manager CHRIS LEES explains how investors can benefit

• Redistribution of global power and influence will impact investors
• Opportunity in energy independence and defence
• Learn more about the Pendal Global Select Fund

INVESTORS shouldn’t fear a shift towards an era of “multi-polarity” where power and influence are distributed among more countries or regions, rather than one or two superpowers.

While such a change would bring geopolitical and economic challenges, it could also create significant opportunities for investment, says Chris Lees, co-portfolio manager of Pendal Global Select Fund.

A re-alignment of global priorities — particularly in regions such as Europe and Japan — has sparked a renewed focus on strengthening industrial bases, upgrading critical infrastructure, and increasing defence spending, Lees says.

These developments align with the strategic focus of numerous companies within the Pendal team’s international equities portfolio — and could see them benefit from these transformative trends.

Below Lees outlines several important trends.

1. Energy independence

“In Europe, the push for energy independence and infrastructure modernisation is accelerating,” says Lees.

“Investments in renewable energy, grid upgrades and industrial automation are critical as the region seeks to reduce external dependencies and transition toward a greener economy.”

Companies specialising in energy management, automation, and advanced grid solutions should be well-placed to benefit from this structural shift, he says.

“As Europe invests heavily in renewable energy projects and grid interconnectivity, companies leading in high-tech cable manufacturing are also poised to see significant demand growth.

“Their expertise will be instrumental in enabling Europe to achieve its sustainability and energy security goals.”

2. Defence and national security

The European Union has signalled sharp increases in defence spending as the war in Ukraine continues and the US appears to become more isolationist.

Japan is also undergoing a significant transformation, renewing its focus on revitalising its industrial base includes infrastructure upgrades and bolstering defence spending.

Co-portfolio managers, Nudgem Richyal and Chris Lees

Japan has pledged to increase defence spending to 2 per cent GDP by 2027, marking a pivotal shift toward strengthening national security, says Lees.

“Companies with expertise in advanced materials and manufacturing technologies are set to play a pivotal role in supporting Japan’s defence modernisation and infrastructure upgrade effort, providing additional tailwinds for these firms,” he says.

“Across the board, we believe aerospace and defence sectors will be key beneficiaries of this multi-polar shift.

“Companies providing advanced steel, telecommunications and engine technologies remain critical for manufacturing military equipment and infrastructure projects in both regions.”

Investing in supply chains

These investments are not only about enhancing military capabilities, but also about ensuring strategic autonomy by building robust domestic supply chains, Lees says.

“This is an area where several of our investment team’s holdings have strong competitive advantages.

“These businesses are critical suppliers to both Japanese and European markets as they prioritise technological sovereignty.”

Growing multi-polarity underscores the importance of geographic diversification in equity portfolios, he says.

“We believe the companies strategically aligned with the priorities of industrialised nations offer strong growth potential through their involvement in critical sectors such as energy, defence, and infrastructure development.

“As industrial nations navigate this new era, we remain committed to identifying opportunities that not only deliver strong returns but also position our portfolio at the forefront of long-term global shifts.”

About Chris Lees and Nudgem Richyal

Chris Lees co-manages Pendal Global Select Fund with Nudgem Richyal. The pair have been working together in global equities investing for more than 20 years.

Chris has more than 32 years of investment industry experience. He joined Pendal Group’s UK-based asset manager J O Hambro Capital Management (JOHCM) in 2008 after spending 19 years at Baring Asset Management, ultimately as head of its global sector team.