The fund aims for growth by investing in the shares of US companies and in equity-related derivatives. It is benchmarked against the S&P 500 index and managed for Investec by US manager Thornburg Investment Management.
Managers Bill Fries, Edward Maran and Connor Browne run the portfolio on a team basis. Fries joined Thornburg in 1995 as managing director and has over 35 years experience. He also worked for USAA Investment Management Company. Maran joined Thornburg in 2002 as an associate portfolio manager and has 20 years investment experience. Browne joined in 2001 and has seven years experience.
The team uses quantitative screening to find attractive companies that are undervalued. The universe of around 10,000 stocks is reduced to a shortlist of 100-150 companies. These companies are then analysed on a bottom up basis and whittled down to 40 to 55 of the best ideas.
Thornburg divides its shortlist into three style groups – basic value, consistent earners and emerging franchises. The portfolio is constructed with a balance between the three groups to provide diversification and position the portfolio for changing market conditions.
Basic value is defined as financially sound established firms that are trading at low valuations relative to their net assets or potential earnings. Consistent earners provide steady earnings and dividend growth but are undervalued, while emerging franchises are attractively valued companies that are establishing a leading position in a product, service or market that is expected to produce above average growth.
This fund had a poor 2008 and slipped into the fourth quartile, but has climbed back to first quartile in its year to date performance for 2009. The fund returned 4.4 per cent this year up to the end of May, beating the S&P 500 by 12.6 per cent.
Hedging returns into sterling will protect investors against currency risk where sterling appreciates against the dollar, but will have a negative impact on returns if the reverse happens.