Best In ClassApr 17 2018

Best in Class: Marlborough UK Multi-Cap Growth

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Best in Class: Marlborough UK Multi-Cap Growth

It commemorates the day, back in 1853, when president Domingo Faustino Sarmiento of Argentina decided to transform Argentina's wine industry.

Having tasked a French soil expert with the job of introducing him to some new vines, among his ultimate selection was Malbec.

Some 150 years later, it is my drink of choice with a steak and chips supper.

What does all this have to do with a best in class investment, I hear you ask?

It's a tenuous link to investing in an uncertain world.

I'm a regular reader of Montanaro Asset Managament's blog and last month Ed Heaven, a product specialist at the firm, highlighted some conclusions of the recently published Credit Suisse Global Investment Returns Sourcebook.

He was discussing the fact that, in uncertain times, investors seek alternative investments – from gold, to wine, and even violins.

The fund's concentration on secular growth companies stood it in good stead in February when markets had their wobble, and the manager used the correction to add to some existing holdings.

However, work by Professors Dimson, Marsh and Staunton has found that, since 1900, wine has returned an annualised 3.7 per cent in real terms, Stradivarius violins returned less, but still beat bonds, and gold delivered a meagre real return of 0.7 per cent.

Equities, in the meantime, delivered 7 per cent per year, with a lower standard deviation of returns.

His conclusion? Wear your gold. Drink your wine. Play your violin. And, despite the uncertainties, invest in equities.

I don't agree entirely when it comes to gold and I know nothing about violins. But I do think drinking wine and investing in equities is the preferred option.

Marlborough in New Zealand produces another of my favourite wines, and its Sauvignon Blanc is arguably the best in the world.

In the northern hemisphere, Marlborough Fund Managers produces some exceptionally good equity funds and has been a FundCalibre Elite Provider for equities three years in a row.

Known more, perhaps, for its small-cap expertise, the firm has a multi-cap hidden gem: Marlborough UK Multi-Cap Growth.

Run by Richard Hallett since 2005, it takes an unconstrained approach and invests more in larger companies than most other Marlborough funds. But this is a deliberate move in order to pick up on the growth opportunities across the whole market spectrum.

The split is currently 12 per cent to mega-caps, 11 per cent in large-caps, 42 per cent in mid-caps, and 23 per cent small- and micro-caps, according to the fund fact sheet for March 2018.

It will be concentrated principally in companies that are leaders in their sector and that can grow regardless of the prevailing economic landscape – arguably an excellent quality in the current environment.

There are certain companies that Mr Hallett tends to avoid, such as those linked to oil and utilities. He studiously analyses the financial statements of each potential investment and considers the quality and sustainability of company earnings, how they generate cash and whether their business is differentiated.

He will want to see that the company has a future where it can grow in its sector but also defend against rivals.

Mr Hallett also uses the team's view of the wider world to make sure the ideas are not outdated concepts.

The fund's concentration on secular growth companies stood it in good stead in February when markets had their wobble, and the manager used the correction to add to some existing holdings, such as Standard Chartered.

In anticipation of its positioning in emerging markets, he believes that it will benefit in terms of margin from higher interest rates. He also added to his holding in Intercontinental Hotels – another emerging market play.

Latin America, and specifically South America, remains an important location for hotel brands expanding in all segments, particularly as they try to take advantage of strong inbound tourism into the region, and more stable governments.

Salo Smaletz, vice president of development for Latin America for IHG, said last year that they are focusing on stable countries and those on the brink of better economic and political stability.

While Argentina has had its issues, they believe it will pull through.

Time to enjoy that locally produced Malbec by the side of a hotel pool?

Darius McDermott is managing director at FundCalibre