Standard & Poor’s Fund Services has found fund managers of global equities funds intent on searching for the companies which emerge as the winners from the economic downturn.
Their move comes against the background of a sixth consecutive quarter of losses for investors in the global equities funds sector. In the three months to the end of March, the median mainstream global equities fund lost 9.6%, while the smaller companies equivalent lost 8.9%, according to S&P Fund Services’ latest update on the sector, available at www.funds.standardandpoors.com.
“The funds that held up best either had a high level of cash, a high weighting to emerging markets or made a well timed move into cyclicals,†said S&P Fund Services lead analyst Alison Cratchley. She said looking for winners from the downturn had become a theme across many portfolios.
One example is the Shariah-compliant S&P AA rated Crescent Global Equity Fund, where manager Adam Ebrahim is seeking market-leading companies, with great franchises, sustainable profitability, proven management, sound balance sheets and robust cashflows. He sees such companies as not only surviving the downturn but emerging stronger with fewer competitors and increased market share as the economy recovers.
In a similar quest for winners, James Fairweather and David Sheasby of the S&P A rated Martin Currie Investment Funds – Global Alpha Fund, focused on some key purchases in the first quarter of 2009. These included Iberdrola Renovables, the world leader in wind energy, seen as a high quality, well managed and liquid play on long-term growth in renewable energy. Another addition was Monsanto, a world leader in crop chemicals, seeds and related agricultural biotechnology, which is expected to enjoy the benefits of its considerable R&D spending in 2010. Meanwhile, Bank of China, one of the country’s four state-owned commercial banks, is expected to benefit as foreign banks repatriate capital and as China’s stimulus programme leads to increased infrastructure spending.
In a slightly different take on the theme, Neil Robson of the S&P A rated Pioneer Funds – Global Trends Fund is concentrating on “recoveryâ€, with the focus on companies with good business models where financing for the next three years is already secure. Examples include Abercrombie & Fitch, BASF, Cardinal, Honda, Intercontinental Hotels, Marks & Spencer, Rolls Royce and United Technologies.
“Given the poor economic outlook, Robson expects the returns to be driven initially not by a pick-up in fundamentals but by a change in risk premia from very high levels to something lower,†said S&P Fund Services’ Cratchley.
