Mark Dampier: Stick with Alpha Plus, despite short-term disappointment

The Analyst

It seems investors' patience runs very short nowadays. Too often they grow restless if they see their fund underperforming for a short period – even three or four months. Really you have to give fund managers more of a chance than this, particularly in markets dominated by political decisions, macroeconomic events and geopolitical risks.

It is virtually impossible to switch whole portfolios from one direction to another, and it is also very costly. Managers have to stick with their long-term strategy, so it pays to have some patience and assess a fund's performance over a longer period.

That said, an investor is entitled to be disappointed with lacklustre progress. One such fund for me is the Schroder Global Alpha Plus fund, which is run by Virginie Maisonneuve. Her high-conviction approach favours good-quality growth companies investing for the future. Despite many admirable aspects to the fund, performance has been poor over the last year, so I recently met with her to understand what has happened.

Her honest reply was to say that very little had gone wrong. Turnover has been low, and she has stuck rigidly to her process – a good sign. Quite often chopping and changing can be a road to ruin in fund management, and it usually tells you the fund manager has lost their nerve. While there have been a small number of stock-specific disappointments, what really seems to be driving underperformance is that the types of stocks she picks are not finding favour with the wider market. In short, her "style" is currently at odds with the prevailing mood.

To explain this it is necessary to look at the central themes of the fund. Ms Maisonneuve looks at the world as an increasingly interconnected "global village" and considers how companies are being confronted by trends that are continually shaping the world. These include climate change and the need to cut emissions; demographics and the resulting shift in demand likely to result from changing consumption patterns; and growing demand for commodities and natural resources. Clearly these are all long-term themes, and with many investors primarily looking at the next year – or even the next quarter – of company earnings, it is easy to understand that her longer-term outlook may not be shared by others.

Looking at the portfolio it is reassuring to find there is real quality. Apple and Google are two stocks that have fared particularly well, capitalising on the proliferation of mobile computing through devices such as smart phones and tablets. Ms Maisonneuve believes Google is good value and retains a 4 per cent exposure in the fund, while she has begun to trim her position in Apple following the stock's tremendous run. She believes we are approaching saturation in the mobile-phone market and while the tablet business offers further growth, profit margins are not as high.

Elsewhere, Home Depot, a US home-improvement retailer, has also been doing well. Property prices in the US seem to have bottomed and consumer confidence is picking up.

Other stocks, though, have not worked so well. Atlas Iron, an iron ore producer based in Western Australia, has been hit by the fear of a Chinese economic slowdown. Continuing urbanisation means iron ore inventories are actually quite low in China and Ms Maisonneuve expects a recovery in the share price. Similarly, Infineon Technology, a German semiconductor company, has struggled due to falling demand for its chips. The business is cyclical and she thinks better times lie ahead.

Herein lies the problem in my view. The market is more interested in defensive, high-yielding stocks than the higher growth companies Ms Maisonneuve is seeking out. Indeed, the fund has tended to perform particularly badly in "risk off" periods such as December last year and May and June this year. Yet these stocks have a latent value, and although they might be perceived as more risky, they could now be good value compared to the more fashionable defensive stocks with which investors are currently enamoured. Defensives may offer greater certainty of earnings but they have less scope for growth – a key ingredient for long-term returns. I suspect funds like this are due a return to form, though in a market dominated by the actions of central bankers and politicians I fear it may be some time coming.

Nonetheless, for investors with some patience, exposure to good-quality growth companies via a fund such as this should pay off over the long run.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial advisor and stockbroker. For more details about the funds included in this column, visit www.hl.co.uk/independent

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
Call The Midwife: Miranda Hart as Chummy
tvCall the Midwife Christmas Special
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there