Boutique investment firm Sterling Investments Limited (SIL) has indicated that declining asset prices worldwide have been paving the way for the company to take advantage of good buying opportunities as global economic volatilities continue.
In line with management's outlook, SIL said the behaviour of markets was now moving as expected and could consequently foster new opportunities as high inflation, rising interest rates and recession fears drive lower prices.
"We anticipate that interest rates will continue to rise, and the probability of a recession has increased significantly. This will present opportunities to purchase undervalued securities at attractive valuations for shareholders. SIL thrives in times of crisis and is cautiously and patiently assessing the market for accretive investment opportunities," the company shared, in an outlook, in notes accompanying its six-month performance.
Its directors noted that while the decline has presented a wide array of attractive buying opportunities for the company, management has been "patiently assessing the macro-economic data, credit spreads and liquidity conditions, to appropriately deploy its capital", if and when needed.
Increasing net interest income by some 8 per cent to total $69 million at the end of the six months ended June, SIL said its current earning capacity remains strong. Despite a dip in its asset base, which totalled $1.8 billion in June 2022, down from $2.2 billion in June 2021 and a plummeting of profits to $7.1 million at the end of the period, the investment company said it retains access to affordable funding which permits the business to take advantage of new market opportunities as they arise.
"In the first-quarter 2022 report, management had stressed that it anticipated a significant increase in interest rates and a decline in the market prices of financial assets. This prediction has manifested itself. While these events have had a broadly negative impact on the company's current performance, it provides a wealth of buying opportunities for SIL and is likely to create value in the medium term," the directors stated.
The investment holding company, which is managed by Sterling Asset Management, deals primarily in fixed-income investments across the globe, particularly US bonds, but has also dedicated a small part of its portfolio to private equity investments.