Given football is my passion, it would simply be remiss of me not to use the start of the FIFA World Cup 2018 this week as the ‘hook’ for this Best in Class.
As the most talented footballers from around the globe congregate in Russia for the tournament, there is much speculation as to which team may win.
In the roll of honour for the previous 20 World Cups, European nations have won on 11 occasions and Latin American nations on nine.
Importantly, on only one occasion has a Latin American team won when the tournament was hosted in Europe.
My pick to win is Spain, with Brazil second and Germany third. England, I fear, may only squeeze through the group phase, with the hosts probably experiencing the same outcome.
In terms of investments however, the outlook is more mixed.
The fund is built on the belief that global investing is about opportunity and choice.Spain has just had its prime minister ousted and a new election seems to be on the cards.
Its stock and bond markets are also sensitive to broader risk sentiment around peripheral debt – as evidenced a couple of weeks ago when Italy had a wobble – so caution is required.
Germany is still seen as a safe haven and the price of bunds rose when investors panicked over Italy.
Its stock market however, the MSCI Germany index, has returned an uninspiring 0.4 per cent over one year to 6 June 2018, according to FE Analytics data.
Brazil, too, has been plagued by political scandals and social unrest. More recently, a week-long nationwide truckers strike has brought the country to a standstill.
But its current-account deficit has reduced significantly, growth is picking up and inflation is still below target.
The MSCI Brazil index, having risen steeply at the start of the year, has fallen some 25 per cent in sterling terms since February, FE Analytics figures from 28 February 2018 to 6 June 2018 show.
The UK stock market is being very British and ‘carrying on regardless’.
I don’t pretend to understand why it keeps brushing aside numerous worries to post ever-new higher highs, but I’m topping up every time it has a wobble.
Russia is very sensitive to the oil price, so has benefited from the rise in the past couple of years.
The recent sanctions sent stock prices tumbling by about 17 per cent (MSCI Russia index, from 5 April 2018 to 16 April 2018, according to FE Analytics), but the market has since recovered.
A fund that encapsulates these ideas? The T Rowe Price Global Focused Growth Equity fund.
Run by David Eiswert, it was designed as a multi-cap, multi-region strategy so it can invest anywhere in the world.
Companies in the current portfolio include selections from each of the European countries mentioned: London Stock Exchange Group, Sartorius AG, and Grifols SA.
Headquartered in Barcelona, Grifols is a leading producer of blood plasma-based products.
Plasma supply and demand fundamentals are solid and the company operates in an attractive industry that benefits from an oligopolistic market structure, high barriers to entry due to regulation and high capital intensity.
German-based Sartorius, the medical technology company, is a leading provider of single-use technologies, which provide substantial cost savings over traditional stainless steel equipment and reduce the risk of cross-contamination, used in the production of biologic drugs.
Mr Eiswert doesn't currently own any Brazilian or Russian companies. Valuations for many companies in Brazil are still reasonable but he thinks the near-term risk/reward is unappealing given the political and economic uncertainties in the country.
The fund is built on the belief that global investing is about opportunity and choice.
As with all T Rowe Price funds, the role of the analyst in finding the right candidates for further scrutiny underlines the process.
The manager uses their best ideas to build the portfolio, integrating macroeconomic and local market factors with stock selection decisions.
He wants to buy good companies where the businesses are getting better over time, and where he and the team have specific insights that will lead to improving economic returns in the future.
So, while the economic recovery in Russia has benefited from rising oil prices and consumer confidence has been improving, Mr Eiswert and his team just have not found any stock-specific ideas in Russia that meet their investment framework to the degree that warrants replacing other, higher conviction ideas in the portfolio.
Darius McDermott is managing director at FundCalibre
