"Most of the trades so far are within Europe to increase our exposure to what we think will be improving credit trends there," he said. "We are increasing our exposure in Asian technology … we should see a rebound in demand of phones and PCs after an extended period of weak demand."
Ariel Investments also likes semiconductors "which will not only benefit from a rebound in PCs and handsets, but the industry has consolidated into just three producers – Samsung, SK Hynix and Micron."
Mallari-D'Auria noted that these semiconductor companies have slashed their capital spending as "demand for chips going into AI servers" continues to increase.
The appetite for tech, large-cap U.S. equities has been insatiable, producing frothy valuations despite the recent sell-off in stock markets, he said. Meanwhile, there has been no significant uptick in searches or hires for non-U.S. and global equity strategies by U.S. asset owners, according to Pensions & Investments' Searches and Hires database.
"You should pay for things when you think that they are likely to turn sooner rather than later," he said, referring to international and global stocks and strategies.
"Consumption continues to grow globally. Yes, growth might be depressed in developed markets because we've seen increases in interest rates here. But we've seen loosening in China, and so eventually, we're going to see consumption rebound there and that will drive earnings for companies who provide consumer goods or consumer services."
Mallari-D'Auria said emerging markets also deserve a place with asset allocators. Emerging market equities "were late to come out COVID," so investors are still seeing a rebound in that asset class, Mallari-D'Auria said. He said equities in Vietnam, India and the Philippines offer attractive opportunities on a risk-reward basis.
"These are countries growing rapidly. They need foreign capital to fully grow at capacity because they don't have as high a level of savings as they need for investment," he said. "Foreigners can get good returns by providing that capital. You don't get 6%, 7% growth largely from productivity."
In developed markets, it is unusual for the U.S. to grow at 3% or 4% adjusted for inflation, Mallari-D'Auria said. "It's not unusual for Vietnam, Indonesia, Philippines and India to grow at high single digits," he said. "That is why we spend a decent amount of time traveling around the world to these markets."
In that regard, Mallari-D'Auria, who spoke to P&I last month for this interview, is traveling overseas this week on the hunt for new companies.
Ariel managed $14.8 billion in assets as of Sept. 30. Earlier this year, Ariel launched two new strategies, Ariel Emerging Markets Value and Ariel Emerging Markets ex-China.
