Emerging markets fund boss aims to help you sleep soundly
Active fund management is under attack like never before. Many people think it is too expensive and fails to deliver the outperformance its promoters promise.
Active: Rob Marshall-Lee picks companies which are unencumbered by debt
Active fund management – where a human being rather than a robot pulls all the strings – is under attack like never before. Many people think it is too expensive and fails to deliver the outperformance its promoters promise.
Yet Rob Marshall-Lee, manager of Newton Global Emerging Markets Fund, disagrees. In his field of expertise at least – emerging markets – he believes active fund management is essential.
Away from the big Russian oil firms and Chinese banks which make up a quarter of leading emerging market indices, he says investment opportunities abound. Search these out, he argues, and a fund manager can prove that active stock-picking delivers in spades.
‘I run a portfolio of 50 stocks,’ says Marshall-Lee. ‘I refer to it as a “sleep comfortably at night” portfolio. On average, these companies are delivering annual profits growth of between 20 and 30 per cent – growth that I believe is sustainable. They are companies unencumbered by debt. There is not a Chinese bank or Russian oil company among them. ’
The fund’s figures speak for themselves. Over the past five years, it has produced average annual returns of around 13 per cent – and the MSCI Emerging Markets Index has delivered annual returns of just short of 9 per cent.
Over the past five years, only two out of 66 comparable funds – Hermes Global Emerging Markets and Templeton Emerging Markets Smaller Companies – have delivered better returns than Newton’s fund.
Marshall-Lee labels himself as a conviction investor which means he is not afraid to back his stock- picking decisions. The fund’s top ten holdings – the likes of Indian technology company Vakrangee and renewable energy company Samsung SDI – account for 45 per cent of the portfolio. The top 20 represent 70 per cent.
‘I am constantly looking for good companies which I can buy at a discount. By good I mean businesses with strong balance sheets, good corporate governance and possessing powerful brands in industries where strong barriers to entry exist. The idea is to buy businesses that I am confident I can hold for at least five years and make money from.’
The fund’s top ten holdings – the likes of Indian technology company Vakrangee and renewable energy company Samsung SDI – account for 45 per cent of the portfolio
Helped by a team of 15 investment analysts scattered across the globe, Marshall-Lee has assembled a portfolio with a strong consumer theme – the biggest country positions being in India and China where strong middle-classes are emerging with money to spend on cars and other consumer goods.
Indeed, cars – and electric motors in particular – are a recurring feature of the fund. Apart from Samsung, it also has a key holding in Chilean-based company Sociedad Quimica Y Minera, the world’s biggest producer of lithium – used in car batteries. Indian car manufacturer Maruti Suzuki is one of the fund’s top ten stocks.
Marshall-Lee says: ‘We bought SQM six years ago when it was known more as a manufacturer of fertiliser. But we added to our position as soon as we saw the transformative impact the electrification of motor bikes and cars would have on its business.’
Unlike other emerging market funds, Newton has no current exposure to so-called frontier markets – pre-emerging markets that embrace countries such as Kenya, Nigeria and Vietnam.
Marshall-Lee adds: ‘What I love about emerging markets is that the variety of company you can choose from is more diverse than it was ten years ago. If you are a good active fund manager you can avoid the potholes in the road.’