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Today's AFR

PM Capital, GQG top global equity list

Investors who bought into last October’s float of ASX-listed fund manager GQG Partners might be nursing their losses, but at least they can be happy with how the group’s flagship global equity fund has stood up as sharemarkets have turned against growth investors.

That’s the message from Morningstar, which examined about 460 global equity strategies in its Australian fund universe and ranked GQG’s Global Equity Fund the second-best performer on a calendar year-to-date basis (to the end of May), with a total return of 3.6 per cent, versus an 11.8 per cent fall in the MSCI World Index.

Top of the pops was PM Capital’s Global Companies fund, managed by Paul Moore; it has produced a 6.79 per cent return to May 31, and boasts impressive annualised returns over one year (9.05 per cent ), three years (18.9 per cent) and 10 years (18.19 per cent). Morningstar describes the PM fund as having a blended strategy, but managing director of research, Michael Malseed, says it has a value tilt.

He says Moore’s numbers reflect both his tilt towards commodities (basic materials and energy accounted for about 30 per cent of the portfolio at the end of March) and the patience of investors.

‘‘The manager’s concentrated approach is known for performance extremes, on both the upside and downside. Investors who have been able to withstand the strategy’s inherent volatility and remain invested for the long term have been rewarded, but it has required a strong stomach to hold on.’’

Shares in GQG are down about 26 per cent on their issue price last October. But the firm, run by executive chairman Rajiv Jain, is the only growth manager to make Morningstar’s top five global equity funds list.

As inflation and interest rates have risen since the start of the year, growth stocks have been hammered, with Morningstar’s Australian-based global value managers outperforming global growth managers by 15 per cent. So, it’s no surprise the bottom five performers in Morningstar’s global equity fund universe for Australia are dominated by growth funds, or blended funds that tilt towards growth.

Bottom of the list is Baillie Gifford Long Term Global Growth fund, which is down 39.8 per cent this calendar year, after delivering bumper returns in 2019 (34 per cent) and 2020 (86 per cent).

Hyperion Global Growth Companies fund is next, down 31.5 per cent in the five months to May 31, although Malseed notes it has delivered strong returns in recent years (including 46 per cent in calendar 2020) and its five-year annualised return of 8.7 per cent remains above benchmark.

Magellan’s High Conviction strategy, which has posted a 24.9 per cent fall to May 31 amid a raft of leadership changes at the manager, was next worst.

Malseed says GQG’s Jain has read the play well. ‘‘This is a manager who is not afraid of high turnover when there is a change in view. Jain deftly reduced exposure to technology names in early 2021, rotating into the then out-of-favour energy sector, which paid off handsomely.’’

The interesting question is whether value’s time in the sun lasts, or whether growth managers can fight back in a world of higher inflation and higher rates?

Malseed says it’s vital for a fund manager to have a consistent approach, but ‘‘it’s not a bad thing for managers to have flexibility and not be captured by dogma’’.