RaboDirect's Key Accounts & Investments Manager, Michael Courtney, recently caught up with Kendal Law of Harbour Asset Management, who have partnered with Baltimore-based global asset manager T. Rowe Price in bringing a PIE version of the T. Rowe Price Global Equity Growth Fund (the Fund) to the New Zealand market. We asked Kendal his views on the Fund and some of the things investors need to be thinking about when considering this Fund as an investment option.
1. Can you explain your role with Harbour and how long you’ve been with the company
I have been with Harbour for 2 years now, and was previously based in both London and Hong Kong in an Institutional research/sales role for both Asia-Pacific and Global Equities with Credit Suisse. At Harbour I am responsible for sales, business development and client relationships.
2. Can you talk us through the background of the Fund and your interest in bringing this offering to New Zealand?
We had clients approaching us for an active solution to investing in global equities and we felt Scott Berg’s Fund was a true global equity fund, with over 130 stocks across 35 countries. When we researched the Fund, and met with the T Rowe team in Baltimore, we felt the investment process of Scott and his team was of high quality research based analysis, and fitted with our philosophy of active management.
3. Can you explain more about T. Rowe Price and the relationship with Harbour?
We felt the approach of active management with a solid research base, and high active share with a strong growth bias sat comfortably with our approach at Harbour, so felt philosophically the Fund would sit very well within the suite of funds we offer. We have a regular communication, and recently hosted Scott Berg the Fund Manager in Auckland, Christchurch and Wellington for a roadshow to investors.
4. Can you explain a bit about the strategy behind the Fund?
The Fund is very much a growth equity fund and looks globally for high-quality growing businesses, with valuations offering high conviction upside potential. Risk management is an integral part of the process and we especially like the active approach (over 90% active share) to Emerging Markets, which is index agnostic and thus not weighed down by market cap index issues.
5. Can you tell us a bit about the Portfolio Manager for this Fund, where are they based and how long have they been managing the Fund?
Scott Berg, based in Baltimore, has been the Portfolio manager for the Global Equity Growth Strategy since October 2008, has been with T Rowe for 14 years. Scott is a MBA Graduate from Stanford University where finished #1 in class.
6. When someone invests in the Fund, where is the money invested?
The money is invested into the Fund and the fund manager has discretion to invest where he sees the best opportunities in the global equity markets.
7. How does the Portfolio Manager decide what the most suitable/appropriate investment options are for the Fund?
Scott can draw upon 160 T Rowe analysts based worldwide, as well as having an associate Portfolio Manager based in London, and two further portfolio specialists. Scott travels extensively himself visiting companies across the globe every month and is highly engaged with all the global resources that T Rowe have in place.
8. How would you describe the performance of the Fund? And what sort of performance should customers expect from this Fund going forward?
The benchmark for the Fund is the MSCI All Country World Index unhedged. We expect this Fund to outperform the benchmark set over time due to the active nature of the Fund, however past performance is not a guide to future returns.
9. What specific performance objectives do you set for the Fund?
The Funds objective is to provide long term capital appreciation by investing primarily in a portfolio of securities which are traded, listed, or due to be listed, on recognized exchanges through the world. The benchmark for the Fund is MSCI All Country World Index (unhedged), with an expected tracking error range of 300-700 bps.
10. Could you explain your thoughts on the risk this Fund carries
The Fund is unhedged from a NZD currency perspective, and invests solely into Global Equities and is fully invested through the cycle. Due to the unhedged nature and the fact the Fund is fully invested, it will be subject to some volatility. We recommend a long term approach to fully realise the growth approach the fund manager utilises. It is not a short term trading fund.
11. What methods does the Fund use to minimise foreign exchange risk?
The Fund is unhedged from a NZD currency perspective, although the fund manager may at his discretion undertake currency hedging if he feels it is warranted within his equity portfolio in times of stress, or from a tactical perspective. We do not hedge the NZD unit price.
12. Has the Fund paid distributions? If so when?
No distributions. Any income earned is reflected within the unit price.
13. For someone who is new to managed funds, what are some important considerations to take into account before investing?
There is currency risk from the unhedged nature of the Fund with regards to the NZD, and thus there may be some volatility around this. Global equities can be a volatile asset class however we try and mitigate this through diversification.
14. How would you see this Fund fitting into investors’ portfolios?
For the investor who wants a truly diversified global fund, with exposure to both developed and emerging equity markets across 35 countries, we feel it fits a global portfolio very well as a core holding, on an unhedged basis. It is a growth fund and should be viewed as such.
To the extent that any information, analysis, opinions or views provided above constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised advice under the Financial Advisers Act 2008, nor do they constitute advice of a legal, tax, accounting or other nature to any persons.