Threadneedle's Citywire AAA-rated fund manager Jeremy Podger has made good on the promise of a global fund that invests only in 'best of breed' stocks from around the world
Your clients might not immediately recognise it, but if there is one investment theme that runs right through every aspects of their lives, it is globalisation.
But the fact that the world and his wife can now talk knowledgeably about globalisation, makes the average UK investor's insistence on investing almost entirely at home, all the more puzzling.
Almost 90% of the global equity market lies outside the boundaries of this small island. In fact, the majority of all UK company earnings already derive from overseas operations.
It is interesting to consider that of the 23 disparate indices that go to make up the MSCI World index, the total return from the UK's stock market in 2004, 7.7%*, was only sufficient for it to be placed 17th.
Whatever the attractions of investing at home, it is difficult to believe that so many clients would have piled into domestic funds if they had the first inkling of how lacklustre the market's performance would look compared to those further afield.
With this in mind, it is clear that most UK-centric investors probably arrived at this juncture simply through lack of a better idea.
Fortunately, Threadneedle's Global Select Growth fund, run by Citywire AAA-rated manager Jeremy Podger looks increasingly like the 'better idea' for which so many have been waiting.
Unconstrained appeal
As Podger explains, the difference in running a global portfolio at Threadneedle is that: "I have access to the quality stock ideas that our constant investment dialogue produces. Last year, for example, we carried out over 3,000 individual company meetings." He adds: "The reporting that underpins our process here feeds straight into the Global Team allowing us to compare opportunities on both their geographic and sector merits. For a fund manager this kind of process means it's like sitting in an ideas factory.
"It is the speed at which these ideas are communicated within the company that is the secret ingredient, one which we feel, enables us to compete with any Global Team, anywhere. I am convinced that, these days, critical mass in a fund business is not about the size of assets under management or the number of analysts that it can buy you; rather it's about the speed and efficacy with which senior managers can communicate the cream of their stock picks."
If the fund has an advantage over its peers - other than the conviction of the research which underpins it - it is that, unlike many in the sector, it abandoned its links to the MSCI World index some time ago.
Podger explains: "This has left us free to pursue a more holistic approach to a global portfolio. I am pleased to say that the fund now consists of the best ideas assembled from global sectors, rather than an aggregate of the best performing stocks from each regional sector - something that produces a quite different effect.
"This approach enables us to build highly efficient portfolios where strong stock selection translates to performance without being held back by passive stock holdings. Too many global funds still suffer from 'index malaise', because they are forced to hold stocks in which they have little conviction but which represent key risks in the index."
In some instances, this index-driven approach has seen some managers cutting stocks from their portfolios after a period of weakness has reduced their index weighting, only to see the stocks' performance subsequently surge.
"By contrast," says Podger, "our approach allows us to manage such risks without ever having to own the specific stock - if not we'd be sitting on an almost 2% position in General Electric right now, even though there are much more attractive plays out there."
Podger's team maintains over 100 stocks in the portfolio at any one time, providing good diversification but still allowing for his sector focus to add considerable value.
His high conviction approach led Podger to UK retailing star Tesco, but not to the world's largest retailer Wal-Mart, "which simply looks too expensive for too little growth", he says.
Another example would be Podger's current heavy underweight of pharmaceutical stocks. Borrowing heavily from the expertise of Anne Marieke Ezendam, manager of the Threadneedle Global Healthcare fund, Podger has navigated away from struggling pharmaceuticals where patent pressures and growth problems remain and steered instead toward biotech and medical technology stocks where the prospects are much more attractive.
The quality of his team also means that, while the likes of Andrew Holliman can be relied upon to generate strong US stock picks such as American Tower, the specialist wireless tower operator, or Massey Coal, an undervalued mining stock with a very strong market position, Podger can consider more esoteric opportunities such as State Bank of India.
This has risen by over 90% in the nine months since it was first purchased and still looks attractively valued from here.
As Podger sees it: "In today's environment, there is no reason why global funds should naturally underperform regional portfolios. In the end it all comes down to manager conviction."
Jeremy Podger is AAA rated by Citywire for his 3 year risk adjusted performance for the period 29/2/2002 - 28/02/2005
threadneedle's global team
threadneedle's global team
Podger is part of a world class Global Team. "Initially, the team constituted Dominic Rossi, head of international equities at Threadneedle and Steve Thornber another very well established manager. They both have more than 17 years of experience in global markets but each has a quite different style. Dominic's particular expertise lies in the US and Latin American markets. This tends to mean he's more tolerant of volatility than most and that he's able to look past the white noise of the short-term to focus on fundamentals. "By contrast, Steve's background in the UK market and his sector focus on commodity stocks means he tends instinctively toward quality stocks and those displaying strong cashflow characteristics. It is Steve's focus on the research and investment process that ensures our best ideas are quickly translated into portfolio holdings."
When Andrew Holliman joined Threadneedle in 2004 he took over the management of the American Growth Fund but importantly he also took up residence as the fourth member of the Global Team. Podger remarks: "His access to the North American market and his unerring focus on shareholder value has not only galvanised the performance of his own fund during a period of range trading in the US but has helped to fuel Global Select Growth's rise through its sector over the last year."
key points
• Jeremy Podger, the fund's manager draws upon the expertise of other senior fund managers within the Global Team.
• By eschewing index constraints, the fund represents nothing but the best investment ideas generated by Threadneedle in markets across the globe.
• Podger sees no reason why global funds should naturally underperform regional portfolios. "It all comes down to manager conviction," he says.
