The £372.79m Henderson Global Growth fund has been run by Ian Warmerdam in its current guise since May 2010, although its track record goes back much further albeit primarily as a technology fund.
Mr Warmerdam notes the aim of the fund is to outperform both the Investment Association (IA) Global sector peer group and the MSCI AC World index in the long term. “We’re not particularly focused on short-term numbers, but we certainly hope to outperform on a three- to five-year basis,” he says.
The manager notes little attention is paid to macro issues, with the process incorporating a “funnel” approach that looks at four areas: broad growth trends in the market, endorsements from within Henderson and in the industry, a proprietary quantitative screen and company meetings. “This generates ideas at the top of the funnel, then we go through two stages of analysis trying to find companies that fulfil six long-term questions or hurdles that are grouped into three areas: the franchise, financials and management,” he says.
The franchise element includes looking for attractive end markets and companies with a strong competitive advantage. Financials focuses on earnings quality, including cashflow generation and the resilience of the company to potentially weather storms, while management pays attention to the quality of the management, its track record and whether it acts in the best interests of shareholders. “We work through that analysis to give us 80-120 companies that become candidate stocks,” Mr Warmerdam explains. “Then more mid-term analysis is applied to determine which go into the portfolio. We run a concentrated portfolio of 45-60 stocks and the fund is not constructed in relation to an index, so it has a very high active share. The more mid-term criteria includes expectations analysis and valuation. That will determine some movement of companies between our monitor list and the portfolio.”
The fund’s key investor information document places the A-share class of the fund on a risk-reward level of six out of seven, while the ongoing charge for the share class is 2.09 per cent.
For the five years to April 9 2015, the fund has met its objective in outperforming both the sector and the index. Its return of 94.51 per cent compares favourably with the IA Global sector average of 50.86 per cent and the MSCI AC World index rise of 60.42 per cent, data from FE Analytics shows.
Mr Warmerdam highlights a number of long-term secular trends and themes that have helped drive stock selection and have therefore contributed to the outperformance. Some of these trends include the transformation caused by the internet, such as the opportunities it creates. Other themes are focused on long-term trends in healthcare driven by demographic changes, growing wealth in emerging markets and energy efficiency, particularly in the car sector.
Consumer discretionary and healthcare have been among the best-performing sectors in the past year, although the lack of energy exposure also helped the portfolio as energy stocks suffered from poor performance. The manager highlights the success of Walt Disney, which is a top-five holding at roughly 3.2 per cent of the fund. He points to how the company leverages the success of content, such as the film Frozen, not only through the box office but also through its theme parks, shops and merchandising. He notes: “[It is] a well-run, vertically integrated organisation and an extremely strong brand. The success of Frozen has driven some strength in near-term results, and with Frozen 2 on the horizon and Star Wars coming up this year [there is] hope for continued strength in the next year or two.”
Meanwhile, energy efficiency in cars through the use of technology such as stop/start systems has helped boost performance with holdings in companies such as Valeo and Continental.
Looking ahead he acknowledges that the broader equity market has performed well for a few years and therefore valuations “aren’t as attractive as they once were”. But he adds: “By aligning the portfolio to strong, secular growing companies [that are] well managed with high barriers to entry, and aligning the portfolio towards a number of secular growth trends that are not necessarily tied to the macroeconomy, we’re confident we can continue to deliver strong returns.”
EXPERT VIEW
Ben Willis, investment manager and head of research, Whitechurch Securities
Manager Ian Warmerdam has run this fund for the past six years and he has done a very good job so far. Mr Warmerdam’s expertise is within the technology sector, which is well represented in his portfolio. The technology sector is predominantly US-led and it has provided outperformance in recent years. This is a solid, core global growth fund, but can Mr Warmerdam keep it up?
