How corporate self-investment is helping UK equities soar

Vishal Bhatia, co-manager of the JOHCM UK Growth fund, explores the companies deploying available surpluses to invest in themselves

For those responsible for deploying capital, standout investment opportunities remain scarce. Bond yields are at multi-decade lows, with nearly $1.5trn of eurobonds yielding negative returns at the end of August. Within equity markets, a combination of the China-led emerging market slowdown, sluggish demand across developed markets and oversupplied commodity markets has meant aggregate corporate earnings will decline in 2015. Despite this, the MSCI World index trades at a double-digit premium to its five-year average. An alternative to equities and bonds is to invest in cash or percei...