Finweek English Edition
A well-diversified, all-weather portfolio
PPS Global Equity Fund with more than 300 stocks remains balanced and diversified and delivers strong returns.
2020 was a powerful year for select consumer discretionary, technology and digital-related companies, where the Covid-19 pandemic provided an acceleration in take-up of their products and services. Against this backdrop, returns from the PPS Global Equity Fund were particularly strong as investments in companies such as Tesla and Amazon generated strong returns over the year.
From early November 2020, following the announcement of several effective vaccines, markets turned their attention to companies that had been previously neglected during the relatively narrow market rally of 2020. The PPS Global Equity Fund managed to participate in both periods, delivering 28.89%* since its inception in January 2020, relative to its benchmark, the MSCI All Country World Index (ACWI), which produced a total return of 20.88% over the same period.
As inflation expectations normalise and economic activity is forecast to rebound following the pandemic shock, the economic backdrop is likely to be supportive of a broader range of companies.
For portfolio managers in the PPS Global Equity Fund, current investment opportunities are not considered a binary choice; cyclical and secular growth opportunities co-exist in the portfolio, which is underpinned by a broad base of core investments.
The portfolio is built on a company-by-company basis by a team of portfolio managers who are given the freedom to make individual high-conviction, long-term investment decisions. The portfolio construction has been deliberately designed to achieve cognitive diversity and ensure a well-diversified portfolio. The result is a portfolio with more than 300 stocks which remains balanced and diversified across regions, sectors, industries and, very importantly, investment styles.
The strategy employed has outperformed the global equity market during every major growth- and valuedriven market cycle over the last 46 years except for a short period in the mid- to late-1980s, which was largely a consequence of being underexposed to Japanese companies at the height of the Japan equity market bubble.
During its lifetime, the strategy has navigated energy crises, runaway inflation, swings in exchange rates, multiple recessions (and recoveries), financial market bubbles, central bank monetary policy experiments, changing patterns of global trade and a global health pandemic. Its consistent results have not been achieved by correctly timing inflection points in markets or having a distinct (and in favour) investment style. Instead, the consistency of the strategy’s excess returns lay in its long-term investment horizon and a well-diversified core portfolio. ■ is head of research at PPS Investments.