Jimmy Hitipeuw | Kamis, 7 April 2011 | 08:01 WIB
Game changers...some fund managers are willing to back their judgement rather than just track the sharemarket.
KOMPAS.com - Fund managers have been criticised for running 'me too' funds that invest in a way that is not very different from the sharemarket index while taking hefty fees from investors for the privilege. However, a handful of fund managers is producing good returns by searching for undervalued companies and backing them.
They are boutique businesses where those running the money own the businesses. Senior investment staff tend to have equity in the business with 'skin' in the game, rather than just being employees.
Rather than worrying about what others are doing, they back their own judgments and are not afraid to be assessed on the results. They hold the stocks they believe in and run the risk of their fund's performance falling behind the market and peer funds.
Rather than hug or mirror the sharemarket index, they shrug off the constraints of most managers. The DWS Global Equity Thematic Fund takes a different approach to investing.
The fund manager picks key themes and trends around the globe. The fund is run by boutique manager Global Thematic Partners from New York, led by the portfolio manager Oliver Kratz. It has an alliance with Deutsche Asset Management.
An investment specialist at Deutsche Asset Management, Bill Barbour, says the trouble for investors in global share funds whose portfolios closely match the global sharemarket indices is that they can end up investing in countries or sharemarket bubbles at just the wrong time.
One of the most widely followed sharemarket indices - the MSCI World index - includes 26 countries but excludes China, India and Brazil and many other emerging economies.
'In 2000, Microsoft was the biggest company in the world and its weighting in the MSCI was bigger than Germany, which is the biggest industrial exporter on the planet,' Barbour says.
'This is a crazy way to construct a portfolio. But that is what most people do. We divide the world into themes that have an inevitability about them - not if but when.'
The fund can have up to a 30 per cent exposure to emerging markets and the fund is pushing against that limit now. The global agribusiness theme is one in which companies that are trying to solve the problem of feeding the world are identified for investment.
Food prices are likely to continue to rise because of population growth, the 'wealth' effect in emerging economies, increasing consumption of meat and dairy, limited agricultural land, global warming and rise in biofuel use.
'Kratz is a high-calibre commander who explores sweeping themes to construct portfolios,' investment researcher Morningstar says.
The researcher is of the opinion that the fund manager's qualities and distinct take on investing will bear fruit for many years to come.
GO ANYWHERE
The way Hunter Hall invests reflects the personal passions of its founder, Peter Hall. The manager has funds that invest in Australian-listed companies and companies listed on global markets.
The way it manages money is unusual in that the manager often takes big positions (up to 30 per cent) in unloved companies. Hall says the manager sometimes engages in 'corporate warfare' and acts like the owner of the business rather than as a passive investor. Sometimes it will take many years to turn businesses around, so Hunter Hall takes a long-term view.
The manager typically favours smaller companies whose shares are cheaply priced and not as frequently traded as the share of big companies. Hunter Hall also has an ethical screen and will not invest in companies associated with activities that are harmful to people, destructive to the environment or cruel to animals.
Morningstar says Hall is the 'heart and soul' of the business and is backed by an experienced team in London and Sydney.
From time to time, its funds will underperform the market. Hunter Hall's funds suffered in 2008 at the height of the GFC. However, that was to be expected, given the way the manager invests.
Once shareholders started selling their shares, it was always going to be the case that the share prices of companies whose shares were not frequently traded were going to be among the hardest hit.
Key holdings for the manager include Korean educational services company Woongjin Thinkbig and Indian bank Allahabad. More recently, Hunter Hall has become an investor in Catch the Wind, which is an American company that has developed a laser that sits on top of wind turbines and directs the turbine into the direction of the wind.
WORLD-CLASS
'There is every reason to own Platinum International and very few reasons to look the other way,' Morningstar says of the fund run by Sydney boutique manager Platinum Asset Management.
The fund invests in international shares and uses an 'eclectic, thematic stock-picking approach in their quest for what they consider undervalued stocks', Morningstar says.
Platinum was founded by Kerr Neilson in 1994 with four former Bankers Trust Australia colleagues. The global shares specialist has an impressive track record. Its flagship International Fund has had an average annual compound return of more than 13 per cent since its inception in April 1995. Platinum has other funds that invest in particular regions or countries or themes.
Neilson says the predominant concern for many managers is not to be too far away from the crowd. 'Platinum's portfolios will look very different to the index … and performances will diverge from the index performance, sometimes for some while,' he says.
Platinum is run as a meritocracy, with the performances of investment staff carefully measured and rewarded. It differs from other managers in that it can take very active views on currencies from an Australian perspective and can short-sell stocks, which, is a way of making money when a share's price falls.
Like most boutique managers, Platinum funds do not to have to remain fully invested. For example, if Platinum believes share prices are about to fall, it can increase the cash levels of its funds. Significant holdings of the International Fund include Shin-Etsu Chemical of Japan, Royal Dutch Shell, and Bangkok Bank.
CONTRARIAN
Global Value Investors is majority owned by Anton Tagliaferro's boutique fund manager Investors Mutual. Global Value Investors applies the same value-investing style to global equities that Tagliaferro applies to Australian shares.
The Global Value Investors Industrial Share Fund does have some holdings in Australian shares but is mostly invested in overseas-listed shares that are paying good dividends.
The head of investment at Global Value Investors, Roy Chen, says a prerequisite to be considered for investment is the quality of the company's balance sheet.
Chen says a mistake that many managers make is they tend to 'go with the flow' when markets are rising and invest not too differently from the market but when share prices tumble, their investors get hurt quite badly.
One of his bigger contrarian calls is Spanish telecommunications company Telefonica. Chen's team questioned the logic of buying shares in the company when the economic outlook for southern Europe was so poor.
However, he was attracted to the telco's sustainable 8 per cent yield on a low price-to-earnings multiple. And while the business faces challenges in Spain, it is doing well in the many other countries where it does business.
The investment team does not invest with a view to being invested in any one country but its stock-selection process gives the fund a high weighting to Germany, having invested in chemical companies. The fund favours liquid natural gas producers and holds shares in the ASX-listed Origin Energy.
Chen says commentators have been saying that supply of LNG had been increasing too quickly and LNG prices would be depressed but that did not change the team's view of it as a valuable commodity. Japan's nuclear power plant problems as a result of the earthquake and tsunami are likely to increase the demand for LNG.
NEXT GENERATION
Generation Investment Management was co-founded in 2004 by Al Gore and David Blood. Its Generation Global Share Fund is a 'sustainable' investment fund that is based on the idea that 'sustainability' factors - economic, environmental, social and governance - will drive a company's returns in the long term.
Colonial First State, the funds management arm of the Commonwealth Bank, is the distributor of the fund in Australia. The fund performed very well during the GFC. Morningstar says the key factors for the outperformance was the large exposure to the healthcare sector and an underweight to the financial-services sector, which was hammered during the crisis.
'We think Generation's long-term approach to global equities investing is one of the best around,' Morningstar says. 'We believe that Generation's strategy, focused on sustainability, is a measured approach that has sound investment merit.'
It is important to understand that this is not an 'ethical' fund, says the general manager of funding and alliances at Colonial First State, Graham Hand. The investment process starts with industry 'road maps', based on how the world is changing, and then finds companies that will benefit from those changes.
An example is Novo Nordisk, a Danish pharmaceuticals company that specialises in diabetes care and biopharmaceuticals. About 180 million people around the world suffer from diabetes and this figure is expected to rise to 330 million by 2025.
Novo Nordisk Novo is the market leader, with a global insulin market share of 52 per cent. The fund also invests in Cochlear, the Australian-listed hearing-device maker.
Words of caution
Fund managers that invest with conviction can often have portfolios that differ from the composition of the sharemarkets in which they invest, but it does not mean they throw caution to the wind, the co-head of fund research at Morningstar, Tim Murphy, says.
These managers have good risk controls but they invest without the usual constraints of most managers, making money any way they can.
This method of investing does, however, mean that from time to time the returns they produce are markedly different to the returns of the market in which they invest, Murphy says.
Almost all of these managers have gone through periods where they have significantly underperformed the market, he says. Platinum has had a poor last six months, Hunter Hall really struggled in 2008 and GVI Global Investors struggled in 2009.
But they are the sort of managers that tend to do better in the longer term, he says. Anyone contemplating investing in a fund that invests with few restraints needs to understand that the fund will experience times of underperformance, compared with funds that invest in a way that closely mirrors or matches the market.
Diversification among fund managers is the best way to mitigate against risks, Murphy says. Investors should not put too much of their money in any one fund.
No comments:
Post a Comment