Rajeev Jain, chairman of GQG Partners, has defended the investment management firm’s decision to avoid what he calls a strange artificial intelligence (AI) trading frenzy. The stance comes despite a multibillion-dollar turnover as the firm’s returns lag many of its larger rivals. In a letter to clients, top stockist Jain expressed his belief that over the past year, the valuations of AI-related companies are likely to decline. GQG Partners is a global investment firm focused on investment management for institutions and individuals. The company’s objective is to deliver long-term value by investing in quality businesses.
Jain’s skepticism about the AI stock boom is well-known, often describing the current trade as “the dot-com bubble on steroids.” The decision to aggressively sell from big tech has hurt GQG’s performance, with investors pulling $US2.1 billion ($3.1 billion) from the ASX-listed firm in December alone. Remembering the fortunes of high-flying firms during the dot-com bubble, Jain says avoiding the AI frenzy is the smartest way to go. American hedge fund investor Michael Burry has expressed similar concerns, predicting a potential systemic crisis triggered by massive investment in AI stocks.
GQG has instead invested in defensive industries such as utilities, insurers, and consumer staples stocks. This strategy has ended five years of market-beating returns. The firm’s $3.6 billion global equity fund fell 3.2 percent in December, underperforming its benchmark last year. Likewise, its $1.6 billion emerging markets fund gained 1.6 percent last month, bringing its benchmark to 20.4 percent for the year.
Macquarie recently cut its price target on GQG by 25% to $1.65, warning that outflows could persist due to the fund’s continued underperformance. Morningstar has also warned of the risk of redemptions between passive funds and competition from other better-performing managers. Shares in GQG have fallen more than 10 percent this year to $1.57, below its 2021 listing price of $2.
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