Colin Woods

PAN-Tribal Asset Management today announced its PAN-Tribal Global Equity Fund has once again maintained its Highly Recommended rating following Zenith’s recent review of the global equity fund sector.

This is the sixth year the Fund has held this rating.

Managed by New York-based Davis Advisors, the PAN-Tribal Global Equity Fund provides a style-neutral, currency-unhedged and benchmark unaware international equities exposure.

In its research report, Zenith commented that its conviction in the Fund “is underpinned by the high regard we hold for the depth and quality of the investment team.”

The research house also noted its positive view of the Davis Advisors’ investment process, observing that it has been successfully and consistently implemented since 1969.

Zenith has met with several members of the investment team and commented that the research house considers the team to be “high calibre” which it views as “a key competitive advantage for the Fund”.

Commenting on portfolio manager Danton Goei, the report states: “Zenith rates Goei as a strong and highly experienced investor.”

Further, the research house notes Goei’s involvement in the management of the Fund since its inception as a positive factor.

PAN-Tribal Asset Management CEO Colin Woods says this rating highlights the importance of a quality investment team and a sound investment approach that is consistently applied.

“Despite another volatile year in global equity markets, that the Fund maintained this highest rating for the sixth year is a testament to the Davis Advisors team and their adherence to their investment process.”

“As we gather with supporters this week to celebrate nine years in business, this rating endorses our approach – to source the best investment products from the best investment managers, wherever they’re located.”

The PAN-Tribal Global Equity Fund is available on most major platforms, including AMP North, BT Panorama, Colonial FirstWrap, HUB24, Macquarie Wrap, MLC Wrap, Navigator, Netwealth and Praemium.

Since the PAN-Tribal Global Equity Fund was launched in 2015, PAN-Tribal’s line up has been expanded to include the Ashmore Emerging Markets Equity Fund, the ATLAS Infrastructure Australian Feeder Fund and the Barwon Global Listed Private Equity Fund.

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Colin Woods

PAN-Tribal Asset Management is pleased to announce the PAN-Tribal Global Equity Fund has maintained its Highly Recommended rating following Zenith’s recent review of the global equity fund sector.

Managed by New York-based Davis Advisors, the PAN-Tribal Global Equity Fund provides a style neutral, currency unhedged and benchmark unaware exposure to global equities.

In its research report, Zenith noted that their conviction in the Fund is “underpinned by the high regard we hold for the depth and quality of the investment team.”

The report also stated: “Zenith has met with most members of the investment team and considers them to be collectively highly qualified and impressive, providing the Fund with a key competitive advantage.”

The research house singled out portfolio manager Danton Goei, commenting it “believes Goei is a strong investor, highlighted by his impressive long-term track record.”

Zenith also commented on Davis Advisors’ style neutral investment process, which it believes results in the Fund being well suited to delivering outperformance throughout the market cycle.

“Davis Advisors expects that the majority of the Fund’s performance will be driven by the investment team’s stock selection skills. Zenith believes the security selection process adopted by Davis Advisors is robust and detailed.”

Commenting on the rating, PAN-Tribal CEO Colin Woods said, “We’re delighted the Fund has maintained its Highly Recommended rating. Despite a poor December quarter in 2018, the PAN-Tribal Global Equity Fund has returned 24.5* percent so far in 2019.

“This highlights the strength of both the process and investment team.” “The ratification of the Fund’s rating coincides with its fifth birthday; it’s a great result for the advisers and investors who have supported the PAN-Tribal Global Equity Fund over the past five years.”

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*at 31 October 2019, net of fees. Past performance is not an indication of future performance.

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Why should we have a positive view of global markets in 2019?

On his recent trip to Australia we asked Danton Goei, 20-year veteran of Davis Advisors^[1] and Portfolio Manager of the PAN-Tribal Global Equity Fund, to share his insights about what happened to global markets in 2018 and why he has a positive view about 2019.

Q: Most investors and advisers are probably thinking – “what the hell happened to markets in 2018?”

A: Well, 2018 was certainly a year of surprises for the market. It was very much a year of two halves; the second half saw a sharp divergence between the performance of the stocks we own and the fundamental results of those underlying businesses.

The market for the calendar year was only down 4% when you factor in dividends, yet from peak to trough, it delivered negative 19%. To top it off, more than 9% of that loss occurred in a single month, December. It was in fact, the worst December in 70 years.

It was different, however; periods of poor performance are typically caused by values declining, or value destruction and that’s not what happened here. Prices went down, performance lagged…but values grew, earnings increased, and balance sheets strengthened!

The good news is that this was a correction during a strong expansionary period…so what that means is stocks ended the year much cheaper than they started. So, when we focus on the fundamentals, it gives us optimism that the portfolio is well positioned.

Q: We are three months into the new year, what does 2019 hold?

A: As bottom up stock pickers, for us it is always about a company’s fundamentals. While the market has got off to a strong start in 2019, we firmly believe “selectivity” is going to matter now, more than ever. We say that because there are areas of the economy and of the market that are stretched very thin. However, overall valuations look fairly attractive and fundamentals look reasonably good.

To put some context around how we are currently investing in this market, the PAN-Tribal Global Equity Fund currently has a forward price earnings ratio (PE) of 11.2x versus the benchmark^[2] PE of 13.8x. The five-year earnings per share (EPS) history of the companies in our portfolio has shown a growth rate of 25% compared to the benchmark growth rate of 13.5%. That sets us up very well going forward. Of course, there can be individual risks with any of the companies we own, but when we look at the portfolio overall, we are very optimistic given our current position.

In our view, the portfolio is “spring-loaded” for recovery once the focus shifts to business fundamentals rather than macro-driven sentiment. We think negative news is mostly priced in, particularly in those companies we own.

Q: From your perspective, where are the risks in the market?

A: Investor behavior is an area of concern. When investors experience a downturn in markets, such as December last year, they tend to feel safe in the investments that protected them during the previous downturn.

So, what do they do?

They rush into stocks that have low volatility – consumer companies, health care companies, utilities. We examined the valuations of these companies and found on average, the top of the low volatility index is trading at around 22x earnings. On top of high valuations, many of these companies have increased their debt by approximately 40% over the last five years, while growing at only 1-1.5% over that period.

History has taught us that when companies begin to cut dividends, a stock trading at 22x earnings, with no growth, record margins and high debt presents a dangerous combination and appears to us to be a microbubble.

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[1] Davis Advisors is the sub-investment manager of the PAN-Tribal Global Equity Fund.
[2] MSCI All County World Index (ACWI

Important Information: The information included in this article is for use by sophisticated investors and investment professionals only. No account has been taken of the investment objectives, financial situation or particular needs of any particular person. This information is provided for general information purposes only and does not contain investment recommendations nor provide investment advice, nor is it intended to take the place of professional advice. Investors should not take action in reliance on information contained in this document. We strongly encourage investors to obtain professional advice and to read the Fund’s current Product Disclosure Statement (PDS) and the Reference Guide which forms part of the PDS before making any investment decision. Investors may invest in the Fund through a licensed financial adviser or an investment platform using the PDS for that platform which can be obtained from the operator of the platform.Equity Trustees Limited (Equity Trustees), ABN 46 004 031 298  AFSL 240975, is the Responsible Entity for the PAN-Tribal Global Equity Fund (the Fund) ARSN 602 036 153 and PAN-Tribal Asset Management Pty Ltd (PAN-Tribal), ABN 35 600 756 241 AFSL 462065, is the investment manager and the issuer of this information about the Fund. PAN-Tribal has appointed Davis Advisors as the sub-investment manager of the Fund. State Street Australia Limited is the third party custodian and administrator of the Fund. None of PAN-Tribal, Davis Advisors, Equity Trustees nor any of their related parties, their employees or directors nor any other person guarantees the repayment of capital or the performance of the Fund(s) or any particular return from the Fund(s). No representation or warranty is made concerning the accuracy or reliability of information contained in this article, nor liability accepted to any person who relies on it. Past performance should not be taken as an indicator of future performance and is provided for illustrative purposes only.

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Managed by New York-based Davis Advisors, the PAN-Tribal Global Equity Fund provides a style neutral, currency unhedged and benchmark unaware exposure to global equities.

According to their report, Zenith believes this style neutral investment process positions it to deliver outperformance throughout the market cycle (i.e. in both rising and falling market environments).

This ratings upgrade came as the Fund reached its four-year anniversary.

The report stated: “Zenith holds a positive view on Davis Advisors’ overall investment process which has been successfully implemented since 1969.”

“Our conviction in the Fund is underpinned by the high regard we hold for the depth and quality of the investment team.”

Zenith singled out portfolio manager Danton Goei, who has managed the Fund since its inception. The report stated, “Zenith rates Goei as a strong investor, highlighted by his impressive long-term track record.”

Of the broader investment team, Zenith noted their analysts have met with most members of the investment team and “…considers them to be collectively highly qualified and impressive, providing the Fund with a key competitive advantage.”

Commenting on the Highly Recommended rating, PAN-Tribal CEO Colin Woods said, “We undertook significant due diligence before appointing Davis Advisors to manage the PAN-Tribal Global Equity Fund; this ratings upgrade supports our belief in the Davis Discipline.”

“It’s a great result for the advisers and investors who have supported the PAN-Tribal Global Equity Fund over the past four years.”

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Colin Woods

Speaking to financial advisers at a recent Pan-Tribal lunch, Danton Goei of Davis Advisors, shared his investment insights – including his belief that there’s no such thing as a ‘must own’ company.

Danton Goei, analyst and portfolio manager of the Pan-Tribal Global Equity Fund explained that valuation is one of three key determinants that underpin Davis Advisor’s (Davis) investment philosophy.

“Investors can get caught up in the hype perpetuated by companies and markets,” said Goei.

“It’s important to look beyond the headline numbers; while the P/E is fine, there are two things wrong with it…the P and the E.” Goei gave the example of car manufacturer General Motors in 2008, when it had US$58.4 billion in underfunded pension and healthcare entitlements; however, this liability was not reflected in its price or earnings numbers.

“The share price generally does not include debt, underfunded pensions or healthcare entitlements,” said Goei. “It’s important to make these key adjustments to a company’s financials to get a true picture of a business. In 2008, GM was really owned by retirees and its employees rather than shareholders.”

Likewise, the analysts at Davis adjust the E, the earnings numbers reported by companies, for a range of factors.

By way of example, Goei explained that there are two types of accounting practices used. The standard practice generally expenses items as costs are incurred, and books profits as they are made. The alternative is program accounting, where expected sales over a specific time are estimated, together with expected costs and, from there, the average profit the company will book each year is calculated – even for year one.

“Program accounting represents a long-term view – but how can an organisation really know how many sales they will make and at what cost?” said Goei.

“There can be quite a difference in reported profitability, depending on the accounting methodology adopted.”

Valuation is not the only important consideration for Davis; their investment approach also looks for quality businesses with a durable competitive advantage, as well as quality management with a track record of sound capital allocation.

The Pan-Tribal Global Equity Fund, managed by Davis Advisors, currently invests in 51 companies across 13 countries. While regional factors are an important input into stock selection, the strategy that underpins the Pan-Tribal Global Equity Fund is a fundamentals-based, unconstrained approach, with bottom-up research conducted in-house. The portfolio holdings represent high conviction ideas from a universe of global investment opportunities.

Colin Woods, Pan-Tribal CEO commented, “I have been very pleased with the traction the Fund has in the market – it recently passed $30 million in funds under management.

“Both Lonsec and Zenith have upgraded the Fund’s rating in the past few months, and it is available through most of the major platforms.

“Importantly, the Fund is being supported by a growing number of key financial planning groups,” said Woods.

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Peter Sackmann

Earlier this month, two investment professionals from Davis Advisors (Davis) visited Australia and presented to a number of financial advisers. Peter Sackmann, Director and member of the Portfolio Review Committee, and Danton Goei, Portfolio Manager of the Pan-Tribal Global Equity Fund, provided an overview of the Davis investment approach, the Fund’s portfolio and answered range of questions from advisers.

Davis takes a truly global perspective when it comes to investing and every analyst at Davis is a global analyst. This methodology was introduced in the 1990s, well before most other investment managers adopted a global approach. Davis recognises that a global view is very important as most businesses are now operating and/or competing in the global arena; there is a high degree of interconnectedness and a very competitive landscape.

Each analyst spends a significant amount of time travelling and visiting company management, and building extensive networks that include industry groups and other investment houses.

Funds managed by Davis, including the Pan-Tribal Global Equity Fund, don’t look anything like the benchmark, and not much like other global equity funds available to Australian investors. While many funds have several stocks in common in their top 10 holdings, Davis is comfortable taking a different approach.

To be represented in a benchmark, a company needs to meet three requirements:

1. It needs to exist
2. It needs to be public
3. It needs to be large.

Under Davis’s investment philosophy, these factors do not help select worthy investments from an opportunity set of 2,500 investment candidates. Focusing on tracking the benchmark is not a recipe for great results, particularly in a global context.

On average, the Fund has just 60 holdings from this broad field. Being benchmark agnostic allows Davis to focus on identifying businesses they want to own, and provides a broader opportunity set in terms of geography, market cap and sector allocation.

Active share measures an investment strategy vis-a-vie its benchmark – the higher the active share, the less the strategy is like the benchmark. Not surprisingly, the Davis global equity strategy – and the Pan-Tribal Global Equity Fund – has an average of 90%+ active share.

As a result, the portfolio of the Pan-Tribal Global Equities Fund looks quite different to those of other global equity funds. Some funds focus on mega cap, some are more US-centric, while others either eschew or focus on developing markets.

In the 1980s it was a good idea to get exposure to a range of economies through investment in multi-nationals; it was this way that many investment managers were able to access China and other developing markets.

In today’s environment however, while some multinationals make good investments, it can be better to focus on key companies in specific markets; many of these are providing serious competition to the multinationals. Increasingly, local businesses with great brands, good management teams and strong operations are providing excellent investment opportunities. Focusing on mega cap businesses can be opportunity lost.

While these businesses might take more work to identify, Davis believes it is worth the effort find great ‘compounding machines’ in all corners of the globe.

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