Mark Dampier: Stick with Alpha Plus, despite short-term disappointment
Saturday 13 October 2012
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
- 1 Home Office says Nigerian asylum-seeker can’t be a lesbian as she’s got children
- 2 What happens to your body when you give up sugar?
- 3 Drugs Live cannabis trial: Hash is less harmful than any other drug, expert claims
- 4 Turkish Airlines flight TK 726 crash-lands on Nepal runway amid dense fog
- 5 Apple and Google users being spied on for a decade because of 'Freak' security flaw
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
Boris Nemtsov shot dead: Outspoken Putin critic who had expressed fears for his life is killed near the Kremlin
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...
Day In a Page
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads