Capital cycle RV opportunities and Japanese insurer deep-dive - VP Thematic

  • Investing alongside the capital cycle is a source of outperformance for equity funds over 2-3y+ time horizons. 
  • VP has quantified the capital cycle to track in real-time for 300+ regional industries. The historical alpha has been in the range of 3-4% per annum.
  • Most capital-abundant industries: US packaging stocks are highly sensitive to the bullwhip effect reversal. Entertainment stocks are still vulnerable. 
  • Most-capital scarce industries: energy and shipping remain very capital-scarce: buy dips in energy services, and tankers have more room to run.
  • A new structural opportunity has been flagged: Asia insurance. We like Japan lifers as an asymmetric play for a higher rate regime and BoJ pivot.
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