Investors have long been told that buying in to the emerging markets makes sense over the longer term, but Thomson thinks a shift in favour of the developed markets is now taking place. Economic growth is likely to be lower in the developing world for some time to come as the sector struggles with the fallout of its booming decade, he warns.
"The last decade was the decade of emerging markets, this decade is ours. Emerging markets will be dealing with over capacity, high inflation and over-investment," he said.
The manager favours developed world equities, in particular those in the US. Thomson says that America’s recent political problems around its debt ceiling are unlikely to be repeated when the next deadlines arrive early next year.
"My view is the shutdown and defaults won’t happen," he said. "The political confrontation wasn’t successful last time, so they won’t repeat it."
Thomson adds that the market is underestimating the impact that shale oil and gas will have on the country’s economy.
He has raised his weighting to the US to 55 per cent from 35 per cent over the course of the last year, as he has redeployed his previously high cash weighting.
"The opportunity is much bigger in shale oil and gas companies than most investors understand," he said.
"In the traditional oil industry, most risk is geographical risk; in shale oil and gas it’s engineering and technical risk. Once you have the right technology, it becomes a repeatable, cookie-cutter process."
Investors are underestimating the capacity of the West to grow faster than inflation, which is currently lower than many people anticipated.
"As long as growth outpaces inflation, economies can grow. Part of weak economic growth is transient: financial tightening and so on."
"The slowdown in China has been a gift to the West. It implies less demand for commodities, which acts as a tax-cut, lowering inflation and increasing [equity] valuations. So decoupling is a reality to some extent."
Rathbone Global Opportunities has beaten its benchmark and sector over the past year, although its figures are only second quartile.
According to data from FE Analytics, the fund has made 26.71 per cent compared with 24.68 per cent from the IMA Global sector and 25.67 per cent from its FTSE World benchmark.
Performance of fund vs sector over 1yr
Source: FE Analytics
One factor that has held him back has been his zero-weighting to Japan: the manager says that he remains much more bearish on the country than the majority of his peers.
"I still have lingering doubts about the recovery," he said. "It relies on the structural reforms and my view is that they could be a lot slower than anticipated."
"They are also stoking up inflation and weakening the yen, but they rely on imports for 90 per cent of their energy; therefore, this could be a problem for them in the future."
The manager says he is also avoiding holding utilities, which are under pressure from consumers and politicians over price rises.
"It’s never good when all your customers hate you," he said.
Over the longer term, Rathbone Global Opportunities’ returns have been very good. Thomson has headed it up for over a decade, and in the past 10 years it is the second-best performer in the 117-strong IMA Global sector, with returns of 230.45 per cent to 110.11 per cent from the average fund.
Performance of fund vs sector over 10yrs
Source: FE Analytics
It is also a top-decile performer over five years and top quartile over three. Over the latter time period it has made 40.4 per cent against the sector average of 29.97 per cent.
Thomson retained a high cash weighting for a long time, having had his fingers burnt in 2008. In that year the fund was one of the worst performers in its sector, losing 39.39 per cent to the sector average of 24.32 per cent.
However, the manager became bullish enough to deploy that cash earlier in the year, as he explained to FE Trustnet at the time.
The manager’s largest holding is Rightmove, which makes up 3.26 per cent of the fund. Visa, ASOS and Tencent are the next largest holdings, giving the fund a tilt towards technology and the internet. He also has large positions in Facebook and Amazon.
The fund is unconstrained by sector, market cap and geography, allowing the manager to express his convictions.
One of the areas he is excited about at the moment is the aerospace industry in the US. Companies are trying to replace their aging equipment, providing opportunities for the manufacturers.
Credit and debit card companies are another theme he is playing in the fund. In total there are 52 holdings, lower than the sector average.
The fund requires a minimum initial investment of £1,000 and has ongoing charges of 1.56 per cent. It is a member of the FE Select 100.
