Monthly commentary By Fund manager Andrew Dalrymple, Aubrey Capital Management Ltd
The outperformance of Aubrey Capital Management’s £36 million Global Conviction Fund over the past few weeks proves the power of active management, according to investment manager Andrew Dalrymple.
The strategy rose by 6.5% in the month to the end of July, eclipsing an ‘uninspiring’ 0.9% rise in the MSCI (GBP) World Index. So far this year Net Asset Value has risen by 30.6%, against a gain of 6.2% in the same benchmark.
Dalrymple said US stocks, led by broadcaster Netflix, accounted for the result. Netflix ended the month 22% higher after releasing strong subscriber figures, Facebook rose 12%, Align Technology11% and Euronet put on 10%.
Among US holdings, which account for 40% of the portfolio, only John Bean Technology and ULTA were lower. Following a recent research trip to America, the manager may look to replace these stocks with more rewarding alternatives.
In Asia, India had another very good month, with the stock market 6% higher. A good set of first quarter figures from Indiabulls Housing Finance was enough to send the shares up by another 10%; with broker upgrades, Eicher Motors rose 12%. The Hang Seng and Chinese stock indices both gained, but US-listed Chinese e-commerce ADRs powered ahead, led by Baozun, the e-commerce facilitator, which rose by 46% in July.
In contrast, while Europe was generally subdued, Ferrari defied Sebastian Vettel’s shrinking lead in the Formula One Championship and accelerated rapidly, (+19%). IT security firm Sophos ticked up by 2%, while reporting first quarter billings growth of 16%, doubtless boosted by recent cyber security attacks.
The fund remains fully invested and maintains an outlook of cautious optimism. At the heart of Aubrey's investment process is the use of a distinctive wealth cycle approach that aims to identify secular growth drivers that result in wealth creation.
Notes to editors
Aubrey Global Conviction Fund
The Aubrey Global Conviction Fund invests in growth stocks worldwide in a concentrated and index agnostic fashion, with the aim of achieving capital appreciation.
As the name implies, it often takes substantial positions in regions and sectors which the managers consider attractive, with the result that the portfolio disposition and performance is generally very different from the MSCI World Index.
Although unconstrained, the Fund tends to be mid-cap biased, and expects its companies to be producing earnings growth of at least 15% over a forecast two-year time horizon, have a 15% forecast return on equity, as well as being highly cash generative, with a cash flow return on assets of at least 15%. In addition to these quantitative requirements the managers emphasise management quality and track record, franchise strength, and competitive advantage. While many of the stocks in the portfolio pay dividends, it is not a priority in the stock selection process.
With such demanding growth requirements, the portfolio tends towards the higher growth regions of the world, and is generally overweight Asian markets, where excellent demographics and strong economies create an exciting backdrop. In developed markets, particularly the USA, the emphasis has tended towards the Technology, Biotechnology, and Consumer Services sectors. As a consequence, the portfolio is usually underweight in Europe and Japan.
Aubrey Capital Management – Website: https://www.aubreycm.co.uk/
Aubrey Capital Management Ltd is a specialist investment manager with a focus on global thematic conviction funds. Founded in 2006 and incorporated in Edinburgh, Scotland, Aubrey is a privately held company with all its shareholders actively involved in the business. The Aubrey team has collective investment experience of over 120 years in the UK, USA, Europe, Asia and Emerging Markets and an impressive track record of managing similar global funds in the past.
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