Algy Smith-Maxwell is fund manager in the Jupiter Independent Funds Team
Morgan Stanley Global Brands
This is an excellent fund for a patient, long-term investor. The objective of the fund is to outperform the MSCI World Index over a full market cycle and also to provide downside protection to investors through the defensive characteristics of the underlying stocks that they select.
It is a concentrated fund of high-quality, global franchises with sustainable high returns on capital employed from dominant ‘intangible assets’ such as brands. In essence, the managers are looking for companies that are likely to generate stable, consistent returns and there is therefore a natural bias to consumer staple companies. Examples of stocks that fit their criteria include Nestlé, Reckitt Benckiser, Philip Morris, Accenture and Unilever.
The team is headed by William Lock who has a terrific work ethic, doesn’t suffer fools gladly and, although undoubtedly tough to work for, takes great pride in his handpicked team. What comes across very clearly is the team’s sense of camaraderie and total dedication to their investment process. When I came out of my last meeting with the management team, I could not help thinking that this was their job and their pastime. A sure sign of a successful team approach.
The £506m fund currently has a position in the Jupiter Merlin Growth portfolio and the Jupiter Merlin Conservative portfolio and has been one of the best performers in the Investment Management Association Global sector over three and five years.
Elliot Farley is co-manager of the T. Bailey Growth fund
We like the unconstrained global approach of the Fundsmith Equity fund, which is a core holding in the global thematic section of the T Bailey Growth fund.
Terry Smith’s fund is a concentrated 26-stock portfolio of high-quality global companies – businesses with little or no debt that generate a high return on capital and have advantages that are difficult for competitors to replicate.
The fund invests only when valuations are attractive and then holds for the long-term. Resilience is an important consideration, so there is a preference for consumer staples and healthcare businesses over companies making big-ticket items such as cars, which are more affected by market cycles. Reckitt Benckiser, Unilever and soft drinks giant Dr Pepper Snapple are among the top 10 holdings.
We like the strict quality screening, the genuinely global approach with no sector or geographical restrictions and the low stock turnover, which keeps down costs.
Holding the Fundsmith Equity fund is in part a play on the increased spending power of emerging market consumers. At T Bailey we were early converts to the emerging markets investment story and the growth prospects for these developing economies continue to look attractive to us. However, we do think the nature of this growth will change, with wages rising and a shift from infrastructure development and exports to domestic consumption.
Performance by the Fundsmith Equity fund has been more than respectable so far. From launch in November 2010 to 31 October this year, the ‘T’ class accumulation share has achieved a return of 27.6 per cent compared with 7.2 per cent from the MSCI World Index.
Tony Lanning is multi-manager director at Henderson
Kennox Strategic Value Fund
More than four years on from the collapse of Lehman Brothers and numerous monetary and fiscal policy experiments later, the global economy remains substantially weak and frail. In this context, the recent market highs have provided us with limited comfort.
Conservatism has, therefore, remained paramount in how we run the Henderson Multi-Manager Absolute Return fund. We favour funds that combine bottom-up stock picking with capital preservation, such as the Kennox Strategic Value fund. Charles Heenan and Geoff Legg, who manage the fund, equate risk to any potential loss, as opposed to volatility or relative measures, a view which marries well with how we run our own fund. With the excitement of quantitative easing waning and the US fiscal cliff looming, we are confident that the Kennox Strategic Value fund will remain resilient to falling markets.
The stocks in what is a long only global equities fund already trade at deep discounts and, together with a position in gold, this should provide a good line of defence. The managers’ contrarian style can be observed through the fund’s cash position, which tends to be highest in rising markets as they take profits and lowest in falling markets when they look to seize advantage of investment opportunities. The managers’ focus is on investing in companies with asymmetric risk profiles, creating the potential for attractive returns with only limited downside risk. This should provide our own fund with a safer and lower volatility exposure to equities – perfect for the cautious investor.
Simon Evan-Cook is senior investment manager at Premier Asset Management
PruSik Asian Equity Income
We are particularly keen on Asia at the moment. The region still has a much stronger economy and demographic in comparison with the West, and in terms of long-term growth – particularly income growth – it is certainly an exciting area from a top-down perspective.
From a bottom-up perspective, we feel Tom Naughton, who manages the Prusik Asian Equity Income fund, has an exceptionally good, albeit simple, approach to managing money. He looks after the basics by spotting very good companies and guarding against the risk that you are buying a company that does not do what it says on the tin. He also cares about valuations.
The fund has half its exposure in the mid- and small-cap space, which means you have stronger growth potential from less researched stocks as there are more opportunities in that region. From a geographical basis, we tend to prefer the Asean countries, such as Thailand and Indonesia. At a market level you have to pay more for them at the moment, but from a macro-economic basis that is where the domestic demand story is strongest because those nations have the demographic tailwind. China does not have this tailwind courtesy of its one-child policy, meaning it does not have a young working population coming through.
We are big fans of Asia on the whole and we are holding close to our maximum in the region. The Prusik Asian Equity Income fund currently represents a 4 per cent holding across our range of multi-asset portfolios.