Quality Growth Boutique

Artificial intelligence (AI) may be one of the greatest technological breakthroughs, but it’s too early to tell. History shows that investment returns don’t always match innovation hype. However, we do know that economic fundamentals have not changed, which means that investments must become self-financing and deliver adequate returns to be sustainable.

Vontobel’s Ed Walczak is among a small number of portfolio managers active today who were also managing money during the dot-com bubble. Ed compares the two time periods and explains how having zero exposure in tech and telecom in the dot-com era, while unpopular, rewarded his investors.

While the promise of AI remains compelling, its market dominance and reliance on external financing create vulnerabilities. By seeking opportunities in areas of predictable growth and resilience – both within and outside the AI ecosystem – we believe investors can better navigate the uncertainties ahead.

Leaders in the video game industry, such as Tencent Holdings, NetEase, and Capcom, offer a distinct blend of predictability and growth through a combination of "Evergreen" titles and new game pipelines. These firms have generated recurring revenues and compounded earnings at approximately 20% annually over the past decade.

AI-driven momentum trades and non-US value dominated markets in 2025. However, the sustainability of these trends remains uncertain, particularly given unproven ROI of AI investments. Amid this backdrop, quality stocks emerge as a prudent choice, offering both resilience and steady growth potential.

International equities offer long-term structural growth opportunities. Europe is undergoing an economic transformation through defense, technology, and infrastructure investments. In our view, rising US risks, like fiscal deficits, underscore the need for diversification.

Markets inevitably shift, but global diversification endures. A thoughtfully constructed portfolio that combines leading US and non-US companies can offer meaningful advantages to long-term investors: enhanced performance potential, compelling valuations and access to growth industries where the US lags.

Quitting is often misunderstood as weakness. But in investing, selling is the overlooked half of decision-making, hindered by biases like sunk cost fallacy or FOMO. In our view, knowing when to walk away is essential for preserving capital and seizing better opportunities.

The pace of progress in AI is extraordinary. But will it displace popular music or broader media in the near term? We continue to monitor developments closely, particularly in hybrid human-AI creative workflows, evolving rights frameworks, and new monetization models that could shift competitive dynamics over time.

In our latest Quality Conversations videos, discover how quality companies—those with strong franchises, pricing power, and unlevered balance sheets—can thrive in uncertain markets. By navigating inflation, shifting economic cycles, and interest rate volatility, these "masters of their own destiny" appear to offer resilience and long-term growth potential.

From deep dives into state and federal probes, to conversations with corporate clients and health plan auditors, our investigative analyst helped identify early warning signs of UnitedHealth Group’ s shift from market leader to a company facing regulatory liability. This case study highlights the benefits that former investigative journalists bring to the Quality Growth research process.

You can now watch the replay of our webinar “Steering through tougher conditions: finding resilience in quality”.