The new macro order: gold, deglobalisation and EM opportunities

Welcome to Beyond the Benchmark, the EFG podcast with Moz Afzal.

Moz Afzal:

Hi everyone. So today I have with me Thomas Roderick. Thomas, welcome.

Thomas Roderick:

Thank you very much. Pleasure to be here, Moz.

Moz Afzal:

So Thomas is the portfolio manager for Trium Epynt Fund. So you're going to have to explain the Epynt for me.

Thomas Roderick:

Well, yeah, I can certainly explain Epynt. So it's a mountain close to where I grew up in the Brecon Beacons. And when we decided we had to have a non-financial name for the fund, and that was the one we came up with, the lack of vowel does put some people off, but the hope is that when they get their head around it, it will stand long in the memory.

Moz Afzal:

I'm sure that'll be the case, but tell us a little bit about yourself. How did you start within hedge fund management and how did you develop your career?

Thomas Roderick:

Yeah, so I first moved to London from the hills of Wales and Epynt Mountain to study physics at Imperial College in London. After that, I joined the graduate scheme at Brevan Howard where I kind of rotated around a bit, worked for the equity macro team, and then had the opportunity to go and work for Hugh Hendry at the Eclectica Fund from 2012. I got given a book, got given more opportunities, became a partner in that business and carried on working there until the fund shut its doors in 2017. I then joined Trium Capital with the aspiration to launch my own vehicle. And we've done that with the macro fund. Initially, we were running money in the multi-strategy fund and then launched the standalone fund in 2022.

Moz Afzal:

Okay. Well, your style is very unique in terms of, I guess, looking through a macro lens. So let's go straight to it and start talking about some of those macro themes that you're thinking about today. I guess the first is around deglobalization. Obviously it's a topic that many have been talking about for many years. Tell us your take on it.

Thomas Roderick:

Absolutely. Some of these longer term themes is really how we try and structure our book. And what we try and do is to try and stay out of trouble in the short term so we can make gains in the long term. So deglobalization for us is really a structural phenomenon. It's not a flash in the pan. It's something that we think is going to be one of the main drivers of macro markets for years to come. Essentially, you've got the emerging power China who have a policy of running an industrial surplus. They want to export a lot of goods to the rest of the world. They struggle with internal consumption. In this type of world, the size of that surplus has become such that it's difficult for the rest of the world to absorb it. And as a result, we're seeing this increase in tension between the established power of the US and China.

And as far as we're concerned, as long as China is going to continue to push this policy of running this industrial surplus, that tension is not really going to die. And the conflict between those two countries is going to grow and grow in economic terms. And the way that we've seen it play out and the way that we've played it on our portfolio in the last few years has been primarily through in long gold. And you ask, okay, well, why is gold a de-globalization play? Well, the reason is if you've got the majority of the world's financial assets in the US sphere of influence, but you've got an increasing proportion of the world's industrial output coming from China, and the US has come to a position where it doesn't really want China to use that industrial surplus to buy its own securities. And so that really leaves China with very little options in terms of where to reinvest that surplus.

The US is trying to weaponize its status as the reserve currency to try and blockade China's growth plans. And the way that China is seeking to countervent that is through accumulating gold and importing a huge amount of gold with its current account surplus instead of trying to accumulate as it did in the past, US treasuries and any other Western assets within that US sphere of influence. And so for us, again, we see the rally in gold in recent years as being one and the same as an increase in that deglobalization.

Moz Afzal:

So let's unpack that a little bit more. Obviously, I guess the other important aspect to that was deregularization of gold markets in China itself. Obviously many locals at least didn't get much opportunity to go and buy say gold futures or anything like that. And obviously that opened up and the floodgates kind of opened. Do you think we've gone to a point where you're seeing excessive speculation in gold beyond that structural shift? And how do you think about those sort of tactical elements? For example, when we had, I guess the crazy spikes we had in January and February or December and January early this year, and then suddenly a very decent correction.

Thomas Roderick:

You certainly had a lot of volatility, a lot of stress in the market. You saw huge import premiums being paid by China in 2025. And then of course towards the end of 2025, that bull market ceased to become purely a structural phenomenon and it became something with a very big financial element as well. And you could see that particularly in the way that silver was trading where you saw silver just absolutely skyrocket over the end of 2025 towards the beginning of 2026. We were long silver through most of that year. We actually exited completely because it got a little bit too crazy for us. But it was very frustrating for us initially going into January when we saw the price go from 80 to 90 to 100 to 110 to 120 until it all sort of blew up at the end of January. You saw a substantial correction in the silver price, in the gold price and in all related markets as well.

It didn't really seem to be a specific thing which sort of broke that. You had seen increases in margin and other things and increased form of control along the way, which didn't really have that much impact until suddenly it did. And with that, we think the market became a lot, lot cleaner. I think whenever you have a very crowded trade, it's always because to some extent it's a good trade. So you have the underpinnings of a strong macro structural trend and then at some point everyone kind of realises that and it gets front run a little bit too much because ultimately whilst the Chinese are buying gold, they can't necessarily accumulate at the same pace as the increase in financial speculation. So at some point the thing becomes top heavy and you see a significant correction. And really it's taken until August this year for the gold market to kind of recover.

 

You sort of see in tentative signs of a bottom and attempted a recovery. Of course, the Iran war didn't really help the gold market. The way that we characterised it is that it led to a shift at the sovereign state level, not so much China, but in other countries like India, Pakistan and Turkey where gold in some senses delayed forward consumption. It's an asset you want to consume in the far future. When your potential supplies of food and energy are being cut off, you shift to more immediate concerns. And as a result with the spike in oil prices, you saw a further decline in gold prices in addition to what you'd already seen earlier in the year when you saw that financial excess come out of the market with the collapse of the silver market. Now we've seen both of those things kind of play out and for us at least the market looks a lot cleaner. It looks like it's time to get back in and you can play that structural trend again.

Moz Afzal:

Now within your strategies, de-dollarization also goes along with that sort of old story. Talk us through that and how you're thinking about that.

Thomas Roderick:

It's been our view for a while that the West's sort of ability or desire to fight inflation is diminished relative to what it used to be in the past. And that's what I really mean by de-dollarization. I don't necessarily mean the dollar is going to become worthless. I just mean that policy is not being driven with inflation as much in mind as it used to be.

And as a result, we've seen creep in inflationary pressures come back in again. And you have Donald Trump who very clearly does not want rates to be hiked. He describes himself as a low interest rate kind of a guy. Whether Kevin Warsh is a low interest rate kind of a guy when push comes to shove, we don't know. And I don't think the rest of the developed world is really any different when it comes to their interest rate policy. Essentially, if the US decides to run a relatively lower interest rate policy relative to the level of inflation, I think everyone else will probably follow through as well. No one wants to see their currency materially appreciate relative to the US dollar. The US is the big global importer.

Europe as a region, as well as most of the rest of the developed world are sort of current account exporters, wheat currency kind of helps them. And so we think that this period will continue where there just isn't as much desire to balance the budget. There isn't as much desire to control inflation as there was in the past. And as a result, we think that again, assets like gold and also other hard assets become increasingly top of mind for investors. Essentially any way that you can come out of it with a real return is far more valuable than it was. The bond market can't necessarily do that for you as much as it did in the past. We've seen one of the worst runs for global bonds that we've seen in decades recently and we don't seem to have seen the other end of it yet. You look at even Japanese bonds which have seen their yields rise substantially still don't seem to have reached a level in which they can encourage people to come back into that market.

You seem to have got a big reluctance of demand to come back into that market because ultimately I think everyone knows that in aggregate Western markets are not going to run policy in favour of bond holders anymore, which is a kind of a shift away from that world we've been since the early 80s. And that's kind of really how I think about dedollarization rather than sort of. It doesn't necessarily need to be a quick rapid deterioration in anything. It can just be a slow burn deprioritization of cash.

Moz Afzal:

Well it makes sense, doesn't it? If you think about the amount of government debt that's mounted particularly over the last 20 years and particularly over the last five years post - Covid, a bit of inflation to deflate away that debt makes sense. If you had the ability as an individual investor, if you had the ability to run higher inflation, i.e. higher wages and eat into that debt burden, everyone would do it.

Thomas Roderick:

Well, the higher your debt burden, the more that strategy makes sense as a sovereign state. And of course you have independent central banks to an extent and they may try and push back against that a little bit. But ultimately we've seen despite that, that clearly the mood has changed and there's a great, great reluctance to hike interest rates. I think there is a fear that it's counterproductive, that it's slow and already quite slow demand. And so it is being avoided as long as possible. And so you can see the strategy clearly playing out in Japan. They kept rates low for as long as they possibly could. And now it's got to the stage where the long end of the bond market is really kind of freaking out and is causing a few problems for them, which is leading the US to kind of come to the rescue a little bit and try and help them out a little bit. But ultimately everyone's in this together.

Moz Afzal:

Yeah. No, I would certainly agree with that. And again, for me, from a rational perspective, that kind of makes sense. The amount of debt there is out there. The only way to deflate it away is to have run the economy's hotter because I think the austerity measures that have been around from post-financial crisis onwards till 2020 didn't work either. If you actually look at the numbers, low interest rate didn't really generate much economic growth. It wasn't a period where you look back and say, well, we had really strong economic growth because we didn't. And debt didn't really get paid off when interest rates were that low either or didn't come down enough. So I think we're just trying a different model or should I say going back to the future, we're trying a model that we've tried in the past, which worked actually by the way, and didn't work during a period of remarkably low inflation and low interest rates.

Thomas Roderick:

The current strategy in some ways probably did work better than that period of global austerity. And yeah, I think do it while you can. It's the easiest way to solve the problem in the meantime. And of course, remarkably, you've got the second largest economy in the world, China, having almost the opposite problem.

Moz Afzal:

In terms of China, moving on to the China topic now, but obviously there are three or four critical elements to that story. The first is the demographic time bomb, which they are clearly dealing with and it's going to get more acute over the next 10 to 15 years. Despite that, still got a huge population. So shouldn't forget that sometimes. I think the stat that I love quoting is that by the end of the century, China's population diminishes about call it 600 million people and that's equivalent of the entire population of Latin America.

Thomas Roderick:

Wow. Yeah.

Moz Afzal:

So it's a pretty big number, but despite that, the population or the working population will still be as big as the United States, if not slightly bigger, even in that environment.

Thomas Roderick:

Well, I'm guessing they're going to probably want to get a few robots as well. I think that's probably their solution.

Moz Afzal:

That is their solution.

Thomas Roderick:

Immigration is not ever going to be the solution for them, I don't think.

Moz Afzal:

Well, it's like Japan, right? Japan was the same. Japan was all about robotics and how they would take over and they would need to immigrate. But in the end, even Japanese immigration started to pick up finally a few years ago. So they've got this demographic challenge. They've got this sort of involution cultural situation going on as well, which means highly competitive, very, very smart people, hundreds of companies all making the same thing and they're exporting that deflation, which is very clear. I love looking at the earnings numbers this year. So China's earnings barely going to be positive this year as an index level, but MSI world is up around 31, 32% earnings growth is what we're projecting for this year. So you've seen this sort of huge divergence occurring and that's the best way to explain what China's doing, eating the margin and making sure they've got exports going.

Thomas Roderick:

It's always the way. And I think you're actually seeing that at an index level within China as well. So you've got the Hong Kong listed shares, you've got quite a few big sort of national champions listed there, the likes of Alibaba, you've got BYD, these huge companies. But the remarkable thing is that China still doesn't have a trillion dollar company. Korea's got two. And you look at the index performance of Asia this year, especially the smaller cap stuff, they're doing very, very well.

And they're sort of eating the lunch of the mega caps, which are becoming slightly less mega as the year is going on, more listed in Hong Kong. And so I think that's a good illustration if you just compare those two Chinese indices in terms of what the Chinese are doing, you've got this huge influx of smaller companies coming in, not facing any competitive hurdles and taking market share and taking market cap off those bigger companies. Whereas in the West, we have more of a policy of underwriting the security of those companies. If you look at the US, Donald Trump will go to Europe, he will go to the emerging world as well and try and defend the rights of the hyperscalers to run their business as they see fit. And if someone puts a tax on them or something like that, he's there fighting in their corner, whereas it's the opposite in China.

And so as a result, I think that makes it quite hard to be a Chinese equity bull in a structural context. I think more tactically you can. So in 2024 and 2025, not this year, we were long Chinese A-shares. We sort of thought the price of those companies relative to their cash flows was too cheap. And there was a bit of a policy of preventing them from issuing as much equity and these anti-involution campaigns were sort of tipping the balance a little bit.

Moz Afzal:

Yeah. No, it's a very good point because I think size is acceptable. Beyond that level is not acceptable. So as long as you're small and growing, you're fine. No, indeed. Once you're a certain size, you're too important and maybe power becomes too important, you'll kind of cut down to size. So let's move on to emerging markets. And I guess the huge observation over the last, I guess 12, 18 months has been basically emerging markets now Korea and Taiwan and everything else is a bit of a byproduct. I keep on reminding many of our listeners and to our clients that when you buy an emerging market index, you're actually from a factor basis, you're pretty much buying those two markets.

Thomas Roderick:

You’re long three companies basically.

Moz Afzal:

Basically, yeah. What are your thoughts around that and how are you thinking about emerging markets on a going forward basis?

Thomas Roderick:

I think when it comes to equities, you're very correct. If you're looking at emerging. Well, you've got these. It's dominated by these countries which aren't particularly even emerging markets. They're pretty developed countries with relatively high GDP per capita, Taiwan and Korea, and they dominate those markets. And so the old school kind of view of emerging markets as a value-based play is just completely been blown out the window. Of course, if you remove those two markets, it's a very, very different story. For us, we spend a lot of our time looking in the fixed income space and in the FX space as well as the equity space. And there I'd say it's not quite as clear cut. Our favourite region is Latin America. Why Latin America? For us, it's because it's a region which is shifting towards capitalism in a world which is de-globalizing. They are shifting very clearly to be more aligned with the US, and typically the market tends to reward countries who do that.

And also they're kind of out of trouble. They don't have a lot of trouble on their doorstep. They're not subject to large migration flows. They're not close to the Middle East where you've got this fight over oil. They're sort of out of the way of the US China fight. And as a result, they can just get on with it. They can be the answer a little bit to some of these problems in terms of increased energy flow, in terms of increased food exports. We would actually kind of put South Africa into this category as well. It's similarly Southern hemisphere out of the way of a lot of these global problems and similarly is kind of shifting to the right economically and is being run in a more economically rational, capitalist friendly way. And so for us, most of our emerging market views are coming in places like Columbia, in Argentina, in South Africa, and potentially Brazil is going to be another one as well.

We've got elections in Brazil coming up in November. That's a bit more tentative. We don't quite know which direction that's going to go. The polls are very, very close, which makes it a bit difficult to play. But across South America, you saw first Argentina and then Columbia this year, you've seen a major pivot to the right, a major pivot toward capitalism, and as a result, probably fertile hunting ground for investors in terms of determining opportunities which are not as much driven by the tech bull market

As you see in the stock market, in the EM stock index through Korea and Taiwan. And you can get something a bit different, which is I think the reason why people always typically went to emerging markets is to get something which is uncorrelated and a little bit different to what they can get at home. And of course that's kind of not the case in those other two big markets, Korea and Taiwan.

Moz Afzal:

Yeah. And obviously we've got the Brazilian election coming along and that's probably the only one that's kind of a holdout from this move right, if you like, but I guess we'll see. Still quite close.

Thomas Roderick:

I think if not this election, probably next election, you're going to see a very clear shift in Brazil. And with that, I think you're going to see a lot more political alignment between South America and North America than you have done for a long, long time.

Moz Afzal:

We've certainly seen that obviously with Millei in Argentina. Obviously we'll see how that experiment goes over the coming years. But that I guess was the catalyst point. And then we had Venezuela and then now Columbia and so and so forth. That's all kind of falling in line with your view. And do you see the currency and fixed income markets in those local currencies as the way to play that or are you thinking through stock markets or anything like that?

Thomas Roderick:

I think it really depends on exactly where you are. For us, we have a big picture theme which we'll have on for a number of years and for us, Latin America as an emergent continent is that big theme. Then how we play it kind of varies from month to month, from a three month period to three month period really. We were very long the Colombian peso prior to the elections, but of course we've seen now a 20% move over the course of four months. And as a result, I wouldn't really suggest that anyone goes into the Columbian peso at this stage. We're looking more at domestic equities. That's relatively illiquid, and so it's not something that you can access beyond a few names. Brazil is obviously a lot more liquid. Yeah. But I think there you've really got to wait until after the elections until you have a clear political trajectory coming up for the next four years.

In Argentina, we think local equities look interesting. I think anything which doesn't have some kind of an FX defence is a bit risky. You still have a lot of uncertainty around what FX policy is going to be. I'd say at the moment, the cleanest opportunity for us is in South Africa where you have pretty high long-term bond rates and you have a central bank which is committed and looks credible in shifting its inflation target down from 5% to 3% alongside a government which is sort of getting its act together and has actually managed to get a power surplus in South Africa for the first time in years and years. And so for us, that's the biggest way that we're playing it right now. But I think for us over the longer term, it's more just the opportunity set is sort of spending time looking at that area, seeing what takes your fancy and finding sort of trades where the short term lines up with that longer term macro view.

Moz Afzal:

Yeah. Great. So Thomas, our time is up. We kind of rush through everything in a super, super fast fashion. So I want to thank you for coming on the podcast. It's your first time. Hopefully we'll get you again on soon to talk about how some of those themes have played out. And of course, wish you the best of luck.

Thomas Roderick:

Thank you so much for having me. It's been an absolute pleasure.

Moz Afzal:

Yeah. Thank you. So it wraps us up for today and we look to hear from you if you have any questions. And of course, if you want to listen again, please do. Thank you.

 

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