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.

- By Andriette Theron Andriette Theron

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.

Long-term resilience

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.

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