Despite a fairly decent start to 2024 for markets there’s a lot for investors to fret about right now. The timing of interest rate cuts, sticky inflation, a looming US election this November, the ongoing Israel-Hamas war in the Middle East and the conflict in Ukraine, to name but a few worries.
A great way of protecting against uncertainty is to invest in Guinness Global Equity Income (BVYPNY2). A quality-focused collective which has been run by managers Ian Mortimer and Matthew Page since launch in December 2010.
The fund, which was launched in the wake of the global financial crisis, has an impressive track record returning 36.9% over three years to investors, 75% over five years and 193.1% over 10 years. This is ahead of its benchmark – the IA Global Equity Income sector – which returned 121.5% over the last decade.
WHAT IS THE SECRET OF THE FUND’S SUCCESS?
The fund has several qualities which make it stand out. Unlike its peers it has a concentrated and equal weighted portfolio consisting of 35 holdings selected from extensive research by managers Ian Mortimer and Matthew Page.
By having 35 stocks of the same weighting in the portfolio stock specific risk is reduced and it also instils a strong sell discipline. Another advantage of an equally weighted portfolio is that potentially, it gives the fund more of a growth bias; an equally weighted portfolio naturally gives greater weight to small- and mid-caps relative to a broad index where large companies dominate.
Manager Ian Mortimer tells Shares: ‘We have a one in and one out stock policy. We take a bottom-up approach when selecting stocks. Picking the best ideas from different sectors [whether that is from] healthcare, industrials, and information technology sectors. We avoid sectors like banking and utilities.’
Companies like Danish drug maker Novo-Nordisk (NOVO-B:CPH) and contract semiconductor maker Taiwan Semiconductor Manufacturing Company (2330:TPE) can be found in the fund’s top 10 holdings.
Novo-Nordisk is the company behind weight-loss drugs Ozempic and Wegovy and reported a trading update in May beating market expectations.
The fund’s geographical allocation is skewed to the US – which is the largest allocation of 54% followed by Switzerland and the UK. Although this is below the weighting of the US market in the MSCI World index.
METICULOUS SCREENING
The managers aim to create a portfolio of quality, attractively valued companies which offer a moderate dividend yield and good potential dividend growth. This all starts with a disciplined screening process.
Mortimer says: ‘When we are selecting a company, we look at its history over 10 years. The company must have a market capitalisation of over $1 billion and be high quality.
‘We ask questions like “does the company pay a dividend? Is it growing?” We look at the share price to assess the company’s valuation. We carry out our own due diligence.’
Mortimer says: ‘Also, before we select the company for our portfolio, we need to assess is it better than something we already own? If it is not currently better than what we have in our portfolio we put the company on our watchlist.’
Mortimer says the portfolio is reviewed quarterly not more frequently as they believe in the long-term growth of their holdings.
The emphasis on dividends is important even if the yield on the fund is relatively modest at 2.6%. Besides delivering a gradual but powerful contribution to long-term returns, dividends can help to counter the effects of market falls and inflation.
If there were to be a deterioration in the global economy and stock markets, we would expect this collection of quality names, which can deliver growth whilst generating cash that can be returned to shareholders, to prove popular. Ongoing charges on the fund are 0.79%.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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