David Dudding, manager of the Threadneedle Global Focus Fund, reveals how the fund aims to differentiate itself from other quality-oriented offerings
What are the key goals of the Threadneedle Global Focus Fund?
When I was running a European strategy, we used to say we run a "get rich slow" fund. It was about trying to find long-term sustainable compounders. With the global fund, maybe we are trying to get rich a little bit more quickly, because there is more growth in other parts of the world than there is in Europe.
But it's not huge returns we are looking for, it's consistency and downside protection. We are looking to outperform the market, but we would rather do it in small steps, rather than a return profile where we outperform by a huge amount in one year because of some lucky punches and give a bit back the next year.
What makes the fund stand out from other quality growth-oriented global equity funds?
Although we are predominantly a quality investor, we can look at areas that pure quality fund managers won't look at, and that means we can aim for outperformance from many different areas, for example in technology and financials. And it's all backed by the fact that we have a very large and strong research team across the globe, which makes it easier to join the dots together.
As well as competitive advantage, what are the other key things you look for in a company?
We also look for companies with improving competitive positioning - there's no use buying a company with great advantages if their situation is getting worse, as this will impact future returns.
What are the key risks associated with your strategy and how do you manage them?
Valuations are definitely expensive. There is a lot of stock-specific risk, as it's a concentrated fund of 30-50 stocks and things can and do go wrong.
We are investing in a lot of big internet names and they obviously have regulatory risks. Companies like Facebook and Amazon and Alphabet. We find it easier to mitigate these risks when we have fewer names and we know more about them.
How big a potential problem is that regulatory risk?
The regulatory risk does loom large for us, as we are overweight some of the US internet names and tech companies. But we think a lot of these concerns are in the price and that these are great businesses that would be much more expensive were it not for the regulatory overhang.
We always try to understand what risks we are running and that we are comfortable with them - and we always expect the unexpected!
To read more from David Dudding on how the Threadneedle Global Focus Fund differentiates itself by seeking out firms with durable competitive advantages, click here.
This article was funded by Columbia Threadneedle Investments.
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