Recent Fund Managers Updates

The importance of meeting fund managers

As we aim to pick highly skilled active managers, face-to-face meetings with fund managers are vital throughout the selection and monitoring process. While our quantitative work will tell us about a manager’s past activity, performance profile and sources of outperformance, manager meetings provide insight that quantitative analysis alone would not necessarily reveal.

 

Financial Market Update - Pensions

 

Fund Manager Visits

Harvest has a policy of meeting with the managers of funds on our Recommended List on a regular basis and providing brief reports of those meetings to clients via our website. Below please see a report following our most recent fund manager meeting.

Fund Manager Visit  :  February 2018

Please see a report following one of our recent Fund Manager meetings with Michael Boyd of GuardCap Asset Management Limited (“GuardCap”)

The Fund Manager Michael BoydFund Managers

Michael Boyd is Investment Manager – GuardCap Asset Management Limited. He joined GuardCap in 2014. Michael has been managing fundamental equity funds for over 25 years.

Last September GuardCap won the ‘Fund Manager of the Year’ award for the GuardCap Global Equity Fund at the Sauren Gold Awards in Germany. The Fund also has been awarded 5 stars by Morningstar. Michael and his co-fund manager Giles Warren are rated AAA by Citywire – the maximum rating.

GuardCap is a specialist investment company based in London, United Kingdom focused solely on managing concentrated, bottom-up strategies. GuardCap is a wholly-owned, indirect subsidiary of Guardian Capital Group Limited (GCGL), a Canadian group founded in 1962 and whose shares are quoted on the Toronto Stock Exchange. GuardCap takes a long term view (minimum 5-10 years) when looking at companies which is in line with the Harvest time horizon for clients.

Fund Manager visits to Harvest

Michael has visited Harvest a number of times over the past couple of years and met with the Investment Management team here to brief them on the strategy and investment process of the GuardCap Global Equity Fund which he co-manages. On his most recent visit to our offices in February he presented on the Fund to the Client Management Team here and conducted a Q&A session to familiarise them with all aspects it.

The Fund initially went on a Harvest watch list almost two years ago following Michael’s initial visit to Harvest where it was monitored in terms of performance, volatility and comparison with other investment funds in this category. This process serves to verify whether it is meeting its objective and is a similar one used for all such investments considered for the Harvest Recommended List.

On the basis of tracking it over this period of time, the GuardCap Global Equity Fund was approved by the Investment Committee at Harvest and added to our Recommended Fund List in November 2017. We were particularly impressed by the very rigorous analysis and research of each company which is considered for inclusion in the select group of 20-25 companies (shares) that make up the Fund.

The Fund – GuardCap Global Equity Fund

The investment objective of the Fund is to seek long-term growth of capital with lower than market volatility.

20-25 stocks are chosen from larger pool of rigorously researched listed companies. Those selected must pass through a thorough process and meet a number of criteria.

The Fund will invest in companies which it believes show a variety of positive indicators, such as a

  • sustainable competitive advantage over other similar companies,
  • excellent management,
  • a strong financial history and
  • outlook and a proven track record of quality growth

The emphasis is on the sustainability of growth

–Will it persist for at least 5-10 years?

–Will it withstand economic shocks?

The Fund will invest primarily in shares and related instruments of shares issued by high quality companies and listed in developed countries (which are members of the Organisation of Economic Co-operation and Development (“OECD”).

The Fund will invest in those companies which the Investment Manager believes are more likely to achieve its investment objective of long-term growth of capital.

Income and capital gains from the Fund are reinvested.

Fund Performance Jan 2015 to date

Fund Manager

 

Fund Manager Views and Comments

  • Strong organic revenue growth will help drive low double-digit earnings growth per annum over the next five years from the Fund’s portfolio of high quality growth companies.
  • The Fund is up 0.09%% year-to-date in Euro terms as of the end of March, compared to the index which is down 3.98%. This means it has already outperformedMSCI World Index by over 4% year to date.

 Harvest View

This is a particularly uncertain time for equity markets with bouts of volatility characterising the year so far with the major equity markets dropping by between 3 and 7% in Q1. This volatility is set to continue for the remainder of the year in our view. Though this can be daunting for investors it should not deter people from making long term investments especially for their portfolios where short term/current trends are less relevant and drops in investment valuations are likely to be more than offset over the longer term. In any case, volatility can provide an opportunity to the investor and Fund Managers to buy in when share prices have fallen and there is negative sentiment in the market which is not based on actual underlying asset/share values.

GuardCap, like Harvest, takes a long term view and the managers chose their stocks on that basis. However, they are well placed to take advantage of unsubstantiated dips in share prices in the shorter term for stocks that they have researched in depth and are closely monitoring as suitable for the inclusion in the Fund.

Fund Manager Visit  :  October 2017

The Fund Manager

First Trust is a US-based manager of a range of both passive and active funds. The firm was established in 1991 and has approximately US$112 billion in terms of total assets under management.

The Fund

The First Trust North America Energy Infrastructure Fund invests in companies and partnerships which own and control energy infrastructure assets such as oil and gas pipelines, power generating plants, grid connection works etc. across the North American continent. It does not invest directly into energy production e.g. oil and gas companies

Fund Manager Views and Comments

While the market values of the assets owned by the fund can be affected by sentiment towards the energy sector, the underlying profitability of the companies owned tends to be very stable and predictable and largely unaffected by power price movements. In addition, as the fund invests in infrastructure for both the traditional and renewable energy sub-sectors, its value and performance will be determined more by overall energy usage than by the source or price of that energy. As a result, the manager is very confident about the longer term outlook for the fund and, more importantly, by the ability of the fund to pay a consistent and growing level of income to investors.

Harvest View

Most of the underlying companies held by the fund are utility companies with quasi monopoly characteristics. The pricing of their products and services is largely controlled by regulatory bodies and generally involves an indexation element. As a result the cash flows of these companies tends to be highly predictable which in turn allows the manager of the fund to distribute a consistent and growing annual dividend to investors. Currently the annual dividend yield to investors is around 4.5% and this should grow steadily over time. We see a place for this fund in client portfolios seeking to generate an annual income significantly ahead of cash deposits.

 

Meeting with First Trust Global Portfolios July 2017

First Trust is a large US fund management group (c.$100 billion under management) offering a range of passive and active funds to investors.

  1. View on Markets

First Trust’s view on equity markets is unashamedly bullish, particularly in relation to the US, where they see positive earnings surprises and Trump inspired stimuli pushing markets forward for the remainder of 2017.

  1. Fund Focus – North American Energy Infrastructure Fund

This is a First Trust managed fund which invests strictly in energy infrastructure companies i.e. the companies who own and manage the pipelines, the electrical cable systems, the grid connections etc. across North America. Most of these companies are quasi monopolies whose profitability is relatively predictable and is independent of energy prices. Because of their nature, these companies have high payout ratios which allows the fund to distribute in excess of 4.5% annually back to investors. Distributions are made monthly. First Trust recently launched a euro hedged share class which neutralises the exposure to the US$.

Fund Performance Jan 2016 to date

This information has been provided for discussion purposes only. It is not advice, it is provided for general information purposes only and does not take into account the financial position, investment needs and objectives, attitude to risk, liquidity needs or capital security needs of any particular person. It should not be relied upon to make investment decisions. Prior to any formal investments taking place you will be provided with a detailed suitability letter taking into account all the above and outlining why the selected fund(s) are (not) suitable for you.

 

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Investment Broker of the Year 2018