Garry Laurence

Perpetual has announced its Global Share Fund has received an upgraded ‘Recommended’ rating from Lonsec.

Key strengths of the Fund recognised by Lonsec include the application of a long-standing and well-proven investment philosophy and process along with a track record of meeting investment objectives.

Portfolio Manager Garry Laurence said: “Obtaining a rating takes time – you need to demonstrate patience in building a consistent performance track record, highlight your expertise and nurture a strong, high performing team.”

Commenting on the Fund’s approach to investing Mr Laurence said: “As a value manager, with a bottom-up investment process, we aim to choose the best quality investments at prices that represent good value, based on their potential risks and returns.”

As at 28 February, the Fund has a five-year performance return of 19.3 per cent per annum net of fees, outperforming the MSCI World Index benchmark by 2.4 per cent per annum.

In respect of the opportunities investors have through investing offshore, Mr Laurence said: “Australian investors may miss out on good investment opportunities if they focus solely on local stocks. For example, sectors such as technology and healthcare are underrepresented locally. Investors may need to look abroad if they want to invest in these sectors in a diversified way.”

“The team is committed to identifying opportunities in global stock markets, including in emerging and frontier markets, to produce strong returns for our clients,” said Mr Laurence.

As at 28 February 2018, the top five sectors the Fund held stocks in were healthcare (12.7%), consumer staples (12.1%), online advertising and transaction businesses (10.8%), telecommunications (8.1%) and banks (7.8%).

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Garry Laurence

Rising global interest rates, political uncertainty and security concerns are creating opportunities for investors to gain exposure to defensive sectors such as healthcare and consumer staples, according to Perpetual Investments.

Garry Laurence, Global Equities Portfolio Manager at Perpetual Investments, said upcoming monetary policy tightening in the US and the unwinding of the monthly €60 billion European Central Bank bond buying may lead to increased volatility in equity markets.

“A period of historically low interest rates across the globe has led to a repricing of risk and a subsequent inflation of asset values across many markets. With trillions of dollars of bonds now trading at low yields, future shifts in official interest rates have the potential to heavily impact asset valuations,” Mr Laurence said.

Despite the uncertainty, Mr Laurence said international shares are an important element of any well-diversified portfolio.

“The current environment only reinforces the need to focus on the underlying earnings trajectory and free cash flow of a business. Over time, the stock prices will follow this trajectory.”

The Perpetual Global Share Fund delivered a total return of 16 percent in the 2017 financial year, outperforming the MSCI World Index benchmark by 5 percent.

The fund’s portfolio has strong exposure to the healthcare and consumer staples sectors, which represent two significant global investment opportunities in the current environment, according to the global equities team.

Consumer staples – recognised brands

“For some time we have been saying the consumer staples sector looks expensive in general. Despite this we have managed to buy some high quality companies with strong brands at opportunistic prices,” said Mr Laurence.

The fund has recently bought into European consumer staples stocks such as Nomad Foods and Britvic, increasing the fund’s weight in the sector to 12 per cent.

“The value of active investing is that even in sectors that may look expensive we can still identify companies like Nomad and Britvic – companies with strong management, solid balance sheets, consistent earnings growth and strong free cash flow.”

Health stocks – a value opportunity

Another major investment opportunity lies with the healthcare sector where stock prices have been weighed down by delayed attempts to reform healthcare and calls for lower drug prices.

“These announcements, and lack of action, have affected the healthcare sector. While political rhetoric around the Affordable Healthcare Act is likely to fuel increased volatility, any further weakness should be seen as an opportunity to find value in the sector, which is set to benefit from significant structural and demographic tailwinds over the longer term,” Mr Laurence said.

The Fund’s healthcare holdings include pharmaceutical company Sanofi Aventis and drug distributor McKesson, stocks expected to benefit from significant market growth as the world’s population ages.

The Fund currently has around 15% of its portfolio invested in cash and fixed interest, giving it capacity to take advantage of value opportunities arising from any weakness associated with temporary fluctuations in markets over coming months.

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Garry Laurence

Perpetual’s Global Share Fund has increased its exposure to technology and healthcare companies over the past 12 months while reducing its holdings in more cyclical industries such as industrials.

The move comes as sectors that have benefitted from the ultra-low interest rate environment face the prospect of increased rates in the near future.

Portfolio Manager Garry Laurence said: “We still own a number of quality businesses in cyclical sectors like industrials, but given the late part of the cycle that we are in, it’s prudent to reduce this exposure and ensure we continue to outperform in falling markets.

“Past performance is no indication of future performance, and I don’t expect sectors and asset classes to perform the same way they did over the past five years in the next five years,” said Mr Laurence.

The fund is now 25% invested in the tech sector, with expectations it will continue to perform well and disrupt traditional industries.

“We have done well investing in technology companies since the inception of the fund. We will continue to apply the same rigorous investment process that has served Perpetual well time and time again in a bid to find high quality companies at fair valuations.”

The fund has also increased its cash allocation to 18%, up from a five-and-a-half year average of about 10%. The increased level of cash reflects concerns about elevated valuations in certain sectors and regions.
“I don’t think volatility in equity markets has disappeared. There are a number of macro-economic factors still to be played out over the coming months that will no doubt create a stir in the market.

“Volatility can distort valuations, and building up our cash position allows us to invest in the right companies at the right time,” said Mr Laurence

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Garry Laurence

Perpetual has announced the launch of the Perpetual Wholesale Global Share Fund Hedged, a new fund that will allow investors to minimise the impact of movements in the Australian dollar on their international investments.

Global Equities Portfolio Manager, Garry Laurence, said it was important for investors to consider a range of factors – including movements in currency – when making global investment decisions.

“With around 98% of the world’s investment opportunities located outside Australia, investors have the opportunity to access companies operating in different regions – and industries – than what they would traditionally find in Australia.

“As a result of this, some investors and their advisers may be concerned about the impact of an appreciating Australian dollar, which can have both a positive and negative impact on their investment returns.

“We believe currency movements may have a material impact on equity returns and will be considered in the investment decision making process of this fund. This is why we have created the fund – to minimise the impact on investors’ funds from any adverse movements in currency.”

In keeping with Perpetual’s 45 year track record in value investing, the fund will adopt a bottom-up approach to stock selection, where the decision to buy or sell is based on fundamental quality and valuation.

The diversified portfolio is constructed within a framework that is independent of the benchmark in terms of stock and sector weights.

The fund will substantially hedge the currency exposure arising from investments in international shares back to the Australian dollar.

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