The UK Oeic version of the Investec Global Franchise strategy recently passed the three-year anniversary from its launch in October 2012 and has gathered £46m of assets. Meanwhile, the wider strategy, which includes a Luxembourg-based Sicav, has amassed $2.3bn (£1.6bn) of assets.
Managed by Clyde Rossouw, the fund aims to grow in value over the long term, focusing on companies deemed to be of high quality and which are typically those associated with global brands or franchises.
Mr Rossouw explains: “The process is essentially to try to identify good businesses that we can own for long periods of time and then to try to recycle the capital out of those businesses when we think the prospects are less good, or we can find things that can do better.”
The approach has not changed dramatically since launch, although the manager notes that in any investment process “one is always looking to try to improve the way you do things, so we’ve evolved some of the thinking. But the gist of the process is the same”.
As with any global fund the macroeconomic factors can’t be ignored – “there’s no way you can buy the investment idea, stick your head in the sand and ignore all the market factors and quantitative factors and what’s going on”, says Mr Rossouw.
He stresses the team is largely focused on finding good investment ideas. “We don’t forecast these [macro] things, but we try to understand the risks about investing in businesses.”
The fund’s I clean share class has a risk-reward level of five out of seven, and ongoing charges of 0.86 per cent, according to its key investor information document.
The Sicav’s performance has been consistent, delivering a five-year return of 46.1 per cent against the Investment Association Global sector average of 28.6 per cent and the MSCI AC World index gain of 33.2 per cent, according to data from FE Analytics.
It has also outperformed both the sector and the index over one and three years to January 27 2016, with its 12-month return of 7.4 per cent easily surpassing the sector average loss of 5.9 per cent and the MSCI AC World index fall of 4.8 per cent.
The manager notes there have been a few ‘incremental’ changes to portfolio, with Visa becoming a top-10 holding and Novartis becoming a “very small weighting in the portfolio”.
But he explains: “They are very minor changes – there are no large-scale conviction changes. We do change but it is evolutionary, and only becomes noticeable over one or two years. We tend to move quite slowly, but if we lose conviction in an idea we are happy to move that weighting down to zero.”
Performance has been helped not only by what the portfolio has held, but also what it avoided, with Mr Rossouw pointing out 2015 had “lots of opportunities to lose money”.
“Avoiding those parts has certainly helped, but [we] also had quite a lot of winners in the fund. So it was very stock specific, while in sectors, tobacco names stand out as being particularly successful.”
On the flip side he admits “there are always problem children in a portfolio”, with four shares underperforming the fund – Samsung, PayPal, Oracle and 21st Century Fox – with Samsung and Oracle also underperforming the market.
“We still think Oracle will do well and have added to that weighting,” says Mr Rossouw. “PayPal we think will do particularly well in the next two to three years, as well. Samsung we’re not so certain about. We’ve kept the weighting, albeit at a smaller level.”
Looking ahead the manager notes a number of headwinds in the market, and in particular the challenges to global growth expectations. But he adds: “We continue to back stock-specific instances and will try to continue to avoid being blown up by market conditions or difficult circumstances. But it is definitely a time to be quite circumspect and to make sure one has no problem children in the portfolio.”
EXPERT VIEW
Rob Morgan, pensions and investment analyst, Charles Stanley Direct
This is a global equity fund investing in industry-leading companies – resilient stocks that have high customer loyalty, as well as strong brands and patents that can be difficult for competitors to replicate. It is concentrated at 25 to 40 stocks and invests for the longer term. Global franchise businesses are likely to be well suited to a lower growth environment, which, given current fears, explains why there are now quite a few funds following this theme. It’s a competitive space dominated by heavyweights such as FundSmith and Lindsell Train, so it’s difficult for a fund such as this to stand out. However, it now has three years under its belt, which could be a catalyst to building assets.
