Amplify Investment Partners’ global equity funds are new to the market, but infused with the DNA of a fund with a 27 year history of outperformance.
Nico Janse van Rensburg, head of positioning at Amplify, said in a recent webcast on Amplify’s offshore developments that the Amplify Global Equity Fund (USD) and Amplify SCI* Global Equity Feeder Fund (ZAR) aim to invest in dominant companies in structurally-attractive industries which will grow their earnings at sustainable above average rates.
While benchmarked against the MSCI World index, the fund is run as benchmark agnostic, as the index is not used as a starting point to portfolio construction. The portfolio holds between 35 to 55 companies, of which the top 10 make up 40% to 50%. The focus is on industry-leading multinationals with large market caps and high daily trading volumes with sustainable, above average growth in earnings, cashflow and dividends.
The high conviction, high active share is managed by US-based Sarofim & Co, a focused global equity manager with assets under management of $25bn which has a long track record managing a similar US-based global equity strategy which consistently outperforms the MSCI World index through market cycles with reduced risk.
Sarofim’s global equity strategy’s cumulative growth in the last 27 years outperformed the MSCI World by almost 60%, would have compared favourably to the five largest funds in the ASISA global equity general category of dollar denominated funds over 10 years, has had a positively skewed asymmetry of returns compared to peers, and an excess annual return of 1.85% compared to the MSCI World Index.
Its investment strategy will be applied to Amplify’s funds. Alan Christensen, a portfolio manager of Amplify’s global funds, said Sarofim is distinguishable from other managers by its world view, where it considers a global opportunity set, and its emphasis on long duration investments. It invests in dominant companies with strong balance sheets and earnings growth in structurally attractive industries.
AJ Gracely, also a portfolio manager, said meetings with company management “are underpinned by our sustainable investment growth philosophy” and focused on unpacking the direction of growth in terms of strategy, the competitive environment, points of competitive differentiation, and how these affect long term revenue earnings and cash flow growth.
Christensen said that this bottom up approach is supplemented by knowledge of macro trends. In 2021, for example, “we came to a decision that over next several years inflation will be higher than expected and interest rates would rise longer than expected”, and adjusted the portfolio accordingly.
Sarofim has been long term overweight staples with superior geographic and category exposures and opportunity for long term growth, as they offer a low risk approach to sustainable growth, driven by consumerisation of the middle class, especially in emerging markets. “We are looking for superior geographic and category positions, strong brands and global distributions,” Gracely said. “What differentiates our staples companies are excellent management teams adding value through effective capital allocation.” Staples in the US-based portfolio returned 22% of their market cap in dividends over the last five years as they added incremental value through effective asset allocations. Sarofim generally favours the food and beverages categories rather than general grocers.
The largest sector allocations include technology, financials and healthcare. The fund has no exposure to real estate and utilities as it tends to avoid companies that are reliant on capital markets to fund their growth, which tend to be interest rate sensitive and capital intensive.
The fund managers will act quickly to sell if there is a risk of permanent impairment of capital, and will consider divestment if an industry is no longer structurally attractive, if a company’s competitive position is changing in an industry, or if management is not allocating capital in line with long term stewardship of outside shareholders’ capital.
Amplify’s Global Equity Fund and SCI* Global Equity Feeder Fund have left the starting blocks with the strong momentum of investment strategies that have been tried and tested over 27 years already behind then. The Amplify Global Equity Fund is available on the Glacier International platform and the Amplify SCI Global Equity Feeder Fund on Allan Gray, Glacier, Ninety-One, Momentum and PPS.
*Sanlam Collective Investments
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