Best-of-breed active management targets stocks with accelerating earnings growth; wins approval from major dealer group
Zurich Financial Services Australia (Zurich) has secured a model portfolio inclusion from a major institutionally- owned dealer group, with a global share fund that challenges conventional thinking.
Rather than following investment norms by focusing on the overall level and duration of a stock’s earnings growth, the Zurich Investments Global Growth Share Fund – managed by American Century Investments – places more emphasis on changes in the rate of earnings growth.
In doing so, the fund seeks to find the ‘inflection point’ in a company’s earnings, therefore reducing the risk of overvaluing a stock.
“Price momentum in global markets over the past 12 months is welcome, and has naturally seen a resurgence of interest in international equities,” said Zurich senior investment specialist Patrick Noble.
“Yet many professional investors point to last year’s strong returns as almost exclusively due to the effect of multiple expansion, not necessarily supported by earnings growth.
“Zurich has brought exclusively to Australian investors a proven investment process that seeks to uncover inflection points in earnings growth”, he said.
“Positive earnings surprises and changes in earnings growth rates can be very supportive of share price moves”, said Mr Noble.
According to Noble, markets are often slow to react to material changes in a company’s performance, and so are often unable to correctly estimate the degree and duration of the effects those changes will have on that company’s stock price.
“This represents an enduring market inefficiency which the fund process seeks to exploit, for the benefit of investors”, he said.
“While today’s macro environment is challenging’ the process continues to identify numerous opportunities. Secular pockets of strength are evident in the shift of conventional media spend to online. Online ecommerce is also taking market share. Priceline Group is an example of a company outperforming in the fragmented global travel market. With market leading brands such as Booking.com, Priceline has a solid history of growing its revenues well above that of not only the total travel market but also those of its online booking peers,” said Mr Noble.
Fund wins Approved Product Listing
Meanwhile the Fund has recently won a position on the Approved Product List (APL) of Westpac-owned licensee Securitor.
Philip Kewin, General Manager Retail for Zurich’s Life and Investments business said this was not only a great endorsement for the Fund itself, but reflected an encouraging degree of optimism about the outlook for global growth.
“Zurich believes domestic demand for growth from improving offshore markets is set to increase. We believe it prudent that investors and advisers would look to blend portfolios to include a global growth manager investing in potentially fast growing companies in recovering economies with a proven underlying focus on earnings,” he said.
Mr Kewin said there were a large number of long – only global equity managers available to Australian investors, “but too few that are truly differentiated by their disciplined, long-term investment approach, consistent high-ratings and enviable performance track record”.
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