Con­sis­tency and qual­ity are key

The In­vestec Global Op­por­tu­nity Eq­uity Fund of Funds in­vests in a num­ber of global eq­uity funds and aims to de­liver a to­tal re­turn, or rather in­come and cap­i­tal growth. Stock se­lec­tion in the un­der­ly­ing for­eign-domi­ciled In­vestec GSF Global Fran­chise Fund

Finweek English Edition - - NEWS - By Jaco Visser ed­i­to­rial@fin­week.co.za

Fund man­ager in­sights

The fund’s per­for­mance over the past 12 months could be as­cribed to it avoid­ing en­ergy and re­source stocks, from a sec­tor per­spec­tive, and emerg­ing mar­kets, from a ge­o­graphic per­spec­tive, ac­cord­ing to Clyde Ros­souw, port­fo­lio man­ager.

“Fur­ther­more, the global eco­nomic en­vi­ron­ment is such that the mar­kets are not see­ing much to­pline growth, and lim­ited pric­ing power, in sev­eral in­dus­tries,” he says. “We in­vest in busi­nesses that are in at­trac­tive in­dus­tries and have price lead­er­ship.”

The port­fo­lio is a “rather con­cen­trated one” with about 25 to 40 stocks, ex­plains Ros­souw, with names that are likely to pro­duce con­sis­tent and qual­ity out­comes.

“We in­vest in com­pa­nies that can cre­ate their own for­tunes, and avoid stocks that are heav­ily ex­posed to eco­nomic mo­men­tum and mar­ket sen­ti­ment,” he says.

The fund lists three of the world’s largest tobacco com­pa­nies among its top 10 hold­ings. Tobacco busi­nesses face lim­ited com­pe­ti­tion, have true pric­ing power through ex­cise tax regimes glob­ally and, de­spite be­ing highly reg­u­lated, pro­duce strong free cash flows, he ex­plains.

An­other dom­i­nant player among the fund’s top picks is An­heuser-Busch InBev, the world’s largest brewer.

“ABInBev is an in­dus­try dom­i­na­tor, which, fol­low­ing the deal with SABMiller, will dom­i­nate the global land­scape in at­trac­tive ge­ogra­phies,” Ros­souw says.

The fund has ma­te­rial ex­po­sure to the con­sumer sta­ples sec­tor, while it is also see­ing some at­trac­tive op­por­tu­ni­ties in in­for­ma­tion tech­nol­ogy and health­care, he adds. “We are re­luc­tant to in­vest in some of the more cap­i­tal-in­ten­sive parts of the mar­ket and we have no in­ter­est in highly lever­aged com­pa­nies,” he says.

“There­fore we are still avoid­ing most fi­nan­cial ser­vices com­pa­nies, along with min­ing com­pa­nies and util­i­ties.”

Why fin­week would con­sider adding it

The fund is skewed to­wards qual­ity dom­i­nant play­ers in dif­fer­ent in­dus­tries that tend to ride out any eco­nomic down­turn.

As Ros­souw ex­plains, the fund steers clear of cap­i­tal-in­ten­sive parts of the mar­ket, which may in­clude min­ing com­pa­nies. When com­pa­nies use their cash flow to buy back shares or pay out con­sis­tent div­i­dends, they typ­i­cally stay away from large cap­i­tal in­vest­ments.

The fund be­ing an off­shore port­fo­lio makes it a solid hedge against the rand’s weak­ness.

The port­fo­lio is a “rather con­cen­trated one” with about 25 to 40 stocks.

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