GUINNESS GLOBAL INNOVATORS: Approach delivers 200% return
The Guinness Global Innovators investment fund makes money for investors by taking stakes in companies involved in cutting-edge technology, from artificial intelligence and clean energy to robotics and automation.
It’s an investment strategy that fund managers Matthew Page and Ian Mortimer have been working on together for 14 years, fine-tuning it along the way. Of the £720m of assets they manage for investors under this theme, just over £600m is in the fund.
So far, the results indicate that the formula works wonders. Since its launch in late October 2014, the fund has returned 200 percent. This compares with the 120 per cent gain the average global investment fund has generated and the 170 per cent gain made by the FTSE World index.
Although the managers’ investment approach focuses on identifying stellar companies operating in sectors that drive both economic growth and transformation, it is not as high risk as it seems.
A number of checks and balances are built into the portfolio to ensure that it remains diversified, is not overly reliant on specific holdings, and does not have a long list of failed holdings. Therefore, if a new company is added to the portfolio, an existing share must be sold, keeping the number of shares at a constant 30. This ensures that the fund focuses heavily on the managers’ best ideas.
Late last month, the fund’s stake in US pharmaceutical giant Bristol Myers Squibb was sold and a position was taken in Danish rival Novo Nordisk.
All of the fund’s businesses must also fit within the nine investment themes that Page and Mortimer have identified as key drivers of growth. When purchased, they must also have a market capitalization of at least $1 billion (£807 million).
Unlike rival funds such as investment trust Scottish Mortgage, it avoids early-stage growth companies that can result in big losses as well as spectacular profits.
Finally, the managers strive to maintain equal holdings in the portfolio of all 30 companies, although the strong price performance of a specific stock often causes this to deviate in the short term.
For example, US software giant Nvidia is currently the fund’s largest holding at 4.8 percent, as a result of its strong share price performance (up 83 percent over the past six months). Managers will cut the position if it reaches five percent. Bets that do not perform well are eliminated. “We don’t water the weeds,” says Mortimer.
The result is a fund that has names familiar to most consumers, such as Alphabet, Apple, Mastercard and Nike. It is also focused on the United States, with 80 percent of assets in companies listed in the United States. There are no British entries.
“When looking to invest in growth companies,” says Mortimer, “the opportunities in the UK and Europe are limited.” Furthermore, because there are few such companies in these markets, their valuations tend to be expensive compared to those of their US rivals.’
While Mortimer is enthusiastic about the fund’s performance, he is not complacent. “Nothing is a given in the investment world,” he says. ‘But a good starting point for successful investing is to identify growth themes. If you can then find the companies best positioned to benefit from these themes, you will be in a good position.”
The fund has annual ongoing charges of 0.84 percent. Page and Mortimer also oversee a global equity income mandate for Guinness Global Investors, a company with assets in excess of £7bn.