Short-term views can create volatility, which can lead to good opportunities for investment, according to the US-based fund manager Loomis Sayles.
The company partnered with distributor IML late last year and launched the Loomis Sayles Global Equity Fund to retail investors in Australia. This offered local investors a wide geographical spread of companies picked by the Loomis Sayles investment team.
The increased focus on short-term views, both in the news and among investors, were a benefit for the fund, said co-manager Eileen Riley, as it allowed the firm to allocate capital to new positions or add capital to ideas that were already implemented in the portfolio.
The fund’s co-manager, Lee Rosenbaum, also explained how the fund leveraged the competitive advantage period (CAP) analysis and how CAP related to the alpha drivers of the portfolio.
“The competitive advantage period (CAP) – which we define as the number of years where we can explicitly express our assumptions about the future progress of a business based on our understanding of a company’s quality and ability to grow intrinsic value – is an integral part of our assessment,” Rosenbaum said.
“It allows us to add another layer of precision to our valuation and, in general, higher quality companies have a longer CAP.
“But CAP is just one input. To get the bigger picture, we need to look at what we call the alpha drivers and where CAP fits in with them.”
This would include a further analysis of the company’s quality, intrinsic value growth and valuation.
“By analysing companies in this way, we have consistency whether we’re looking at a pan-Asian insurance company (AIA) or a Swiss software company (Temenos),” the manager noted.
The Loomis Sayles Global Equity fund has returned 22.5% over one year to 11 September, 2019, according to FE Analytics, versus returns of 12.7% by the ACS Equity-Global sector.