With change the one constant in investment markets, global equity manager Morphic Asset Management (Morphic) is gaining increasing attention for the steady, risk-adjusted returns generated by its flagship Morphic Global Opportunities Fund (the Fund).
After four years’ steady performance, and growing recognition from the financial adviser community, the Fund is now available on BT Wrap, Macquarie Wrap, NetWealth, CFS First Wrap and Hub24.
Deploying a risk controlled long/short active investment process, the Fund has performed strongly over three years to June 2016.
It has outperformed a number of known global equity peers over the same June year-end period, also adding high double-digit gains to investors since inception in August 2012 (18.59% annualised since inception, net of fees).
The Fund has held steadfast to its core investment principles: invest for long-term capital growth, focus closely on risk management and, above all, seek good quality low-priced stocks with earnings growth from participating in sustainable change on the upside.
Balancing the value/growth/momentum equation has been a hallmark of Morphic’s approach, helping it to consistently match or exceed target risk and return outcomes.
Morphic co-founder and MD Jack Lowenstein says the ‘morph’ in the firm’s name implies a culture of flexibility – a strength in being alert to market shifts and moving quickly to buy or divest during any market cycle.
“We begin, however, by first looking for stocks that are low-priced, with strong momentum – a sign that change is both investable and enduring,” he says.
“Morphic explores an all cap, all country universe of investable opportunities, which is a pretty wide field of securities. It is therefore important that we are able to empirically separate hype from real change, and thus find those undervalued stocks amongst the right sectors, within the right countries.
“Real change to us means significant shifts making a measurable influence at either an industry, technological or political/economic level,” Mr Lowenstein said.
“Our firm’s motto is change creates opportunity,” said Chad Slater, Morphic co-founder and executive director.
“In times of uncertainty, investors seek out certainty of earnings. Power Grid Corporation of India is a recent case in point, making a large positive contribution to the Fund,” says Lowenstein.
Power Grid owns and operates the power networks inside India. The country’s hunger for power requires decades of transmission capacity being added to the network, making it a long term predictable growth story.
Another positive contributor is D.G. Khan, the Pakistani cement manufacturer. “June 2016 vindicated our view that Pakistan is more “investable” than many non-market observers think, with MSCI upgrading it to Emerging Market status and adding it in that index,” says Slater.
Another consistent outperformer for the Fund has been Tokyo property developer Open House.
“Japan has been out of fashion for so long after its awful 1980s property bubble, but Tokyo has been growing steadily at the expense of the rest of the country, and Open House is an entrepreneurially run company, growing strongly, on exceptionally low valuations,” says Lowenstein.
