Martin Currie stung by fund’s removal from Wealth 150
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Martin Currie has expressed disappointment at Hargreaves Lansdown’s decision to remove its Global Alpha fund from the Wealth 150, although admitting its process has lagged for the past 18 months.
Hargreaves deleted the portfolio from its list of 150 recommended funds last week, noting that Global Alpha had struggled since the start of the credit crunch. Meera Patel, a senior analyst at the adviser firm, attributed the underperformance to poor stock selection.
Andy Sowerby, a managing director at Martin Currie, says: “In [Hargreaves Lansdown’s] analysis, they note we had a ’superb long-term track record, [using an] approach built over a long period of time’. We are therefore disappointed with their decision as it appears to be in response to short-term underperformance delivered through the financial crisis”. (article continues below)
Launched in June 2006 and run by James Fairweather and Neil Robson, the £27m portfolio is ranked 137 out of 159 funds in the Investment Management Association Global Growth sector over three years to March 11, according to Morningstar. This follows a fall of 5.07%, versus the peer group mean return of 6.48%.
Sowerby says: “In general terms our process, which is focused on identifying quality companies at attractive valuations where we forecast strong earnings growth, lagged for 18 months. In the second half of 2008, the market collapse was indiscriminate and, if anything, quality stocks were sold due to their better liquidity.
“Looking at 2009, market returns were driven by the most highly leveraged companies in the market. These companies were, broadly speaking, in a distressed position, had poor balance sheets, unclear valuations and did not meet the threshold of quality we require. On a risk-reward basis they were not appropriate investment opportunities in our view.”
However, market moves this year have started to validate the fund’s stance, according to Sowerby. It is becoming evident that earnings and business quality are once again driving returns, he says.
In addition, Sowerby argues that the market is entering a period when stock selection is paramount. He says: “The macro forces of leverage and government stimuli are behind us, ahead of us it is about picking companies that can fund their growth and take market share from weaker competitors. In short, it is once again about alpha, not beta.”
Hargreaves does not recommend investors sell the fund, noting its established investment approach.
