Our feeling was that this is a well-managed global fund which has delivered strong performance. The volatility is not as high as some of the adventurous global funds but equally it doesn’t appear to have the spike in performance that is common with these funds.
For new investors choosing the right sector or country can be daunting. Often they are drawn to the best performers, and those being advertised. This strategy could work but the reverse is also true with investors being disappointed because they haven’t fully understood the investment strategy.
We have reviewed several Global Growth and Income Funds. Some have a heavy bias to the US, some are more globally diversified and some like Baillie Gifford Global Discovery and Scottish Mortgage are more suited to higher risk investors.
We recently met the manager of the SLI Global Equity Unconstrained Fund. The name is slightly misleading as it tends to imply this fund is more volatile to generate greater returns. In reality the volatility of the fund sits at 13.38% which is in the middle of the more adventurously managed global funds and the more cautious funds, and therefore this fund should not be seen as a highly volatile global fund. It is fundamentally a stock picker’s fund and although macro has a part to play it is about choosing globally sustainable companies.
The fund manager explained that this is a high conviction strategy with currently 48 holdings and the top twenty holdings making up 58% of the fund. Unlike some global funds the top holdings only carry around 2 to 3% weightings so no one weighting dominates the fund. This helps ensure that one stock doesn’t dominate the portfolio. and volatility of the fund sits at 13.38% which is in the middle of the more adventurously managed global funds and the more cautious funds.
Geographically the manager explained that the consequence of the current weighting is more to do with where the good companies are rather than a preference to a particular area. Currently the weighting is 44% towards the US, 10% UK, Europe 15%, Asia 15% and Japan 6%. The balance is spread across other areas.
Performance since the manager took over in 2010 has shown an outperformance of the index. In 2011 and 2014 to date the fund was slightly behind the index. In line with its volatility rating this fund doesn’t display great swings in performance but steady consistent performance.
In this update Mikhail covers some of his global views and provides some of his stock selections.