Coronation’s global picks - June 2021
Many advisers and investors don't like the idea of an unconstrained unit trust
By Stephen Cranston
Many advisers and investors don’t like the idea of an unconstrained unit trust. Imagine the possible surprises.
But in the early days of the Coronation Optimum Growth Fund in 1999, its portfolio manager, the maverick Walter Aylett, changed the allocation between shares and cash almost daily.
He wouldn’t recognise Optimum Growth today. It’s a mainstream global equity fund, albeit in Morningstar’s aggressive allocation category. A dollar version of the fund has now been launched, and it is no longer a one-man band. Gavin Joubert is the name on the fact sheets but he is backed up by 25 analysts and fund managers.
“Anyone in the public, or even an adviser, who opts for specialist international portfolios won’t know where to start”
Joubert argues that anyone in the public, or even an adviser, who opts for specialist international portfolios won’t know where to start. As he explained to the Investment Forum last week, retail investors can buy funds that cover China, Japan, the UK, the eurozone, property, bonds, the fourth industrial revolution, ESG (environmental, social and governance issues), value, momentum, growth and quality. And these are just the regulated funds.
With a worldwide flexible mandate, Joubert says Optimum Growth is not bound by regulatory limits; it is also geographically unconstrained and, when it looks sensible, can allocate money in assets other than equities. Right now it has 15.6% in cash, 3.4% in commodities, a negligible 1% in bonds and 1.4% in property.
Over 22 years the fund has provided a 14.5% annual return, compared with 11.6% from its benchmark, a hybrid of SA and global indices. The internal research isn’t rigidly divided between developed and emerging markets. For example, Chris Cheetham follows Spotify in the US as well as Tencent Music in China, while Humaira Surve looks at Seattle-based Amazon as well as its Chinese peers Alibaba and Meituan.
And this team cross-fertilises with 19 domestic analysts who are experts on relevant businesses such as Naspers — the largest share in Optimum Growth.
The fund is technology dense today, with JD.com and Alibaba the next-largest shares. Fintech is represented by consumer brand Visa, consumer goods by Philip Morris International and Heineken, and entertainment by Disney.
The stress benefit
Joubert believes it is not a disadvantage to run global money from Cape Town. And he believes we have certain advantages in SA as life is stressful and never as smooth as it would be in Zurich, say. Over 10 years an analyst in SA might experience inflation and interest rates doubling and halving, not to mention similar commodity price traumas.
Joubert has adopted a few of the popular themes. There is nothing original in backing e-commerce by owning Amazon or Latin American counterpart Mercado Libre, for example. But there are also sundry shares in the fund which offer good prospects at a decent price such as Airbus, Indian home loan specialist HDFC and Canadian Pacific, a railway business that seems to belong more to the first industrial revolution than the fourth. Joubert has been a long-term supporter of Porsche, which controls Volkswagen (VW). He says that by 2023, VW’s electric vehicle production will overtake Tesla’s.
He still leans towards emerging markets, where many companies are marked down because of perceived political risk. Ping An Insurance in China, a quality operation, trades on a p:e of just 7.5, for example, while Magnit — the Shoprite of Russia — sits on a p:e of 13.2 and a dividend yield of 8.7%.
This article by Stephen Cranston was featured in Financial Mail on 17 June 2021.