ARTEMIS SMARTGARP GLOBAL EMERGING MARKETS EQUITY FUND uses data to stay ahead

Fund manager Artemis is a British success story. Created 27 years ago, it oversees £26 billion of assets on behalf of investors.

Although he is largely an “active” investor, with fund managers responsible for the portfolios they build, nearly 10 percent of his money is managed in a more methodical way.

It is run on a system called ‘SmartGARP’ (GARP stands for ‘growth at a reasonable price’).

The portfolios of the four funds managed in this way (UK Equity, European Equity, Global Equity and Global Emerging Markets Equity) are built from the results of the data that a vast internal computer program processes every day on individual companies.

Everything from profits, cash flow, revenue and dividends to forecasts.

In simple terms, the computer scores companies out of 100: the higher the score, the more investable a company is.

Two administrators, Philip Wolstencroft and Raheel Altaf, ultimately decide the components of the funds, but they are guided by what the computer tells them.

“It replicates the work of thousands of analysts,” says Altaf. ‘By investing in financial data, including niche and novel data, we have a system that gives us an advantage in the company insights it provides.

“Our role is to use information in the best possible way, creating diversified portfolios across sectors and companies.”

He adds: “As the GARP label implies, the goal is to have a portfolio of companies that we haven’t paid too much for and that will make money for our investors, as their growth is reflected in increasingly higher stock prices. “.

The strategy has proven most effective in global emerging market equities, which account for £1bn of the £2.5bn of assets managed this way.

Over the past five years, it has generated a return of 47.5 percent, well above its peer group average of 20.3 percent.

Altaf says the computer analyzes data on 3,000 emerging market stocks, and the fund comprises companies drawn from the “top” 10 percent of companies that have been given the highest scores.

The fund currently has 80 shares. If a company’s score improves, more shares are typically purchased. On the contrary, if it starts to fall, the positions slowly unravel.

“It’s a data-driven approach,” says Altaf, “which means it doesn’t fall victim to sentiment swings common in emerging markets.” Swings that often result in investors selling at the first sign of trouble, such as trade tensions or geopolitical risks. Our fund continues to invest in the best companies.’

Altaf says the final product is a fund in which overall holdings are undervalued compared to its benchmark, the MSCI Emerging Markets Index, but in which analyst forecasts are more positive. In other words, there is potential for stellar share price growth.

Its holdings also have stronger returns on equity than the index and more cash available to pay shareholders a decent dividend. The fund currently offers investors an attractive yield of 4.9 percent.

“Many companies in China and South Korea have learned their lesson,” says Altaf. ‘Instead of expanding, they are now focusing on strengthening their balance sheets. This translates into better cash generation and strong dividends for shareholders.’

Altaf, who has been leading Global Emerging Markets Equity since its launch in April 2015, adds: ‘All the companies in the fund are there thanks to strong fundamental analysis by SmartGARP. It’s a system that will outlive me, that’s for sure.’

The fund has an overall ongoing charge of 0.86 per cent.