Investors looking for a top-performing global fund without the bumpy ride that often comes with high returns might want to consider the £929m Comgest Growth World fund.
The FE fundinfo four-crown rated fund is ranked top-quartile over the past five years for performance and is one of less than a dozen funds in the global sector that have managed to do so whilst maintaining top-ranked low volatility.
Run by Laure Negiar, Zak Smerczak, Richard Mercado and Alexandre Narboni, it has been meaningfully underweight the US for the past decade but has still kept up performance.
Below, Negiar tells Trustnet about how the market worries less about her quality companies with visible growth when times are tough and why she uses a lower discount rate for companies with good environmental, social and governance (ESG) credentials.
Total return of fund vs sector and benchmark over 5yrs
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Source: FE Analytics
What is your process for picking stocks?
Our investment process is bottom-up, benchmark agnostic, and based on intense on-the-ground research by our investment and ESG analysts across the globe.
We assess both financial and non-financial factors to identify high-quality companies that should be able to grow their earnings at a sustainable double-digit pace over our five-year time horizon - regardless of sector or geography.
As a result of our bottom-up stock-picking, we have found gems in all regions, including Japan and emerging markets, and as such have had very different sector and geographic weights compared to the benchmark, for example, over the past 10 years, we have been meaningfully underweight the US market.
Why should investors pick your fund?
Over its 30-year track record, the Comgest Growth Global strategy has delivered double-digit annualised returns for investors with notable outperformance in down markets and below-benchmark volatility.
Investors should pick our portfolio because it offers a distinct and consistent approach to global investing: our process and philosophy have not changed so we would expect a similar outcome and profile going forward, over the long term.
The portfolio also has strong ESG characteristics including a low carbon footprint, as a result of our quality-focused investment style.
How risky would you say your fund is?
Less risky than the market and most global equity funds. Over the 30-year history of the strategy, in negative quarters our portfolio on average has only been exposed to 61% of the market’s fall.
For instance, at the peak of the pandemic in March 2020 when markets were in a time of great stress, our portfolio was outperforming the market by 10 percentage points.
Thanks to our companies’ quality and visible growth characteristics, investors tend to worry a lot less about them than the market at large when times are tough.
As a bottom-up investor, we view risk in absolute terms – permanent capital loss – and seek to invest in high-quality businesses with proven business models to reduce this risk as much as possible.
What have been your best and worst calls over the past year?
Our investment horizon is five years, so looking just at the past year feels very short-term to us. But in the spirit of answering the question, our best investment has been Alphabet which is up 82% over the past year (as of 30 September 2021). This stock is not new to our portfolio, having made its entry into the portfolio in 2011.
Our worst has been Alibaba, which is down 43% over the same period. We still own both as we still believe there is meaningful upside to their share prices on a five-year view.
Which stock in the fund are you most excited about?
Intuit, the leading provider of software solutions for small businesses in the US and owner of the QuickBooks and TurboTax franchises.
The cloud has helped the company expand its addressable market considerably and small businesses are increasingly seeing the value of working with the Intuit ecosystem. We think the company’s growth will accelerate from the already high levels of the past.
Do you incorporate ESG into your fund?
Yes, it is crucial to our focus on sustainable quality growth companies. We integrate ESG in the portfolio – and all our funds – because we believe a responsible approach to environmental, social and governance issues has a positive impact on a company's long-term sustainable growth.
We think extra-financial criteria can have a meaningful impact on the profit and loss statement (P&L) on our long-term time horizon. One of the ways in which we reflect this is by impacting the discount rates we use in valuation models.
We lower the discount rate for the highest ESG performers and we raise it for those in need of improvement, thus hardwiring ESG into our investment decision making process. The Global portfolio is classified as Article 8 under the European Sustainable Finance Disclosure Regulation that came out this year.
Are there any sectors you won’t invest in?
No sectors are taboo but there are sectors in which we tend to find less of the kinds of companies we like (i.e. that can generate sustainable growth over the long-term), in particular energy and financial services.
In these sectors, we find that many companies’ business models depend on exogenous factors, such as the price of oil or the level of interest rates and as such don’t offer the kind of long-term visibility that we are looking for.
We also have an exclusion policy at Comgest which prevents any portfolio from investing in areas like tobacco and controversial weapons.
What do you do outside of fund management?
I read a lot of fiction. There is so much non-fiction reading involved in fund management that I like to turn to fiction outside of work. I am also an avid runner and yogi.