Looking out over the next three to five years, I think that we’re shifting away from an environment of free money. The past few decades have been marked by massive unprecedented fiscal and monetary expansion where inflation was benign. In that environment, it’s been fairly straightforward for companies to grow revenues and profits.
Going forward, we’re shifting to an environment where the relationship between economic growth and inflation is more positively correlated, and that should create a cost of money for the first time in a long time. It should create more volatility, and it should create an environment where companies have an opportunity to differentiate themselves both positively and negatively in terms of their idiosyncratic performance. I expect it will be an environment where risk awareness, risk mitigation, and valuation will matter.
For this fund, that environment should act as a positive backdrop for us.
Note: This interview was edited for length and clarity.