Superior stock selection drives outperformance

17 May 2019

With separately managed accounts (SMA) hitting top speeds in terms of growth, AllianceBernstein’s Concentrated Global Growth Equities Portfolio has cemented its position in the SMA space by taking out the Separately Managed Accounts category at this year’s Fund Manager of the Year Awards.

According to chief investment officer, Mark Phelps, the firm’s SMA offering is a concentrated portfolio of high-quality growth companies trading at attractive prices, and it’s managed to outperform the MSCI World Index over the long-and-short-term.

Phelps said the firm only targeted stocks that it believed could grow earnings at 10 per cent a year or more over five years.

“The portfolio is concentrated for the simple reason that relatively few such stocks exist,” he said.

So how does AB choose stocks when those that tick its (many) boxes are so few and far between? Well, Phelps said it begins by narrowing down the opportunity set to an investment universe of around 100 companies, and then its investment team does some serious research to determine which ones make the cut.

“Each analyst focuses on a small number of companies, usually a maximum of 10, enabling them to fully investigate all aspects of the businesses,” Phelps said. “We believe that our analyst-to-company ratio is one of the highest in the industry.”

The rigorous research process is what allows the AB team to prepare five-year projections for all investment prospects, and those projections are a critical tool in developing a comprehensive and detailed evaluation of a company’s business, which, according to Phelps, allows AB to act with confidence.

BlackRock’s iShares Enhanced Strategic Growth SMA and the Quest Australian Equities Concentrated Portfolio were finalists in the category, and both were glad to see SMAs finally being recognised.

BlackRock’s Michael McCorry said the renaissance of managed accounts provided investors greater access to professionally managed strategies, and Quest’s Christopher Cahill shared the same view, adding that SMAs allowed investors to enjoy total portfolio transparency, and to avoid any unintended tax consequences.

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