GQG Partners chairman Rajiv Jain has defended the investment management firm’s decision to avoid what he calls a frenzied artificial intelligence (AI) trading mania. This stance comes despite billions of dollars leaving the business as the firm’s returns fall behind many of its major rivals. In a letter to clients, Jain, a high-profile stockpicker, expressed his belief that valuations of AI-related companies, which have surged over the past year, are likely to slump. GQG Partners is a global investment firm focused on managing investments for institutions and individuals. The company aims to deliver long-term value by investing in quality businesses.
Jain’s scepticism towards the surge in AI stocks is well-known, frequently describing the current trade as “the dotcom bubble on steroids”. This decision to aggressively sell out of big tech has impacted GQG’s performance, leading to investors pulling $US2.1 billion ($3.1 billion) from the ASX-listed firm in December alone. Jain maintains that avoiding the AI frenzy is the most prudent path, recalling the fate of high-flying firms during the dotcom bubble. American hedge fund investor Michael Burry has also voiced similar concerns, predicting a potential systemic crisis triggered by massive investments in AI stocks.
GQG has instead invested in defensive industries such as utilities, insurers, and consumer staples stocks. This strategy has eroded five years of market-beating returns. The firm’s $3.6 billion Global Equity Fund declined 3.2 per cent in December, underperforming its benchmark by 23.1 per cent last year. Similarly, its $1.6 billion Emerging Markets Fund shed 1.6 per cent last month, trailing its benchmark by 20.4 per cent for the year.
Macquarie recently slashed its price target on GQG by 25 per cent to $1.65, cautioning that outflows could persist due to the fund’s likely continued underperformance. Morningstar has also warned about the risk of redemptions amid competition from passive funds and other better-performing managers. Shares in GQG have fallen more than 10 per cent this year to $1.57, significantly below its 2021 listing price of $2.
