WHY GUINNESS GLOBAL INNOVATORS IS ESSENTIAL TO YOUR PORTFOLIO?
The Guinness Global Innovators Fund is an actively managed fund which has been an integral part of Astra's portfolio. It aims for long-term capital growth and provides global exposure to companies benefiting from innovations in technology, communication, globalization, or innovative management strategies. The fund is concentrated and equally weighted of 30 stocks, which reduces stock-specific risk. It is more focused on information technology, with North America being its primary geographical allocation.
This is our go-to recommendation for our clients, particularly growth investors. While the fund is heavily affected by economic factors such as rising interest rates, inflation, and other economic uncertainties, we remain confident that it will meet its objectives for our clients. Here’s why we think Guinness Global Innovators Fund is worth investing into:
Performance
Guinness Global Innovators performance since inception (2014) in GBP as of September 30, 2022. Performance prior to its launch on 2014 reflects the Guinness Atkinson Global Innovators fund, US mutual fund with the same investment process since 2003. The bar graph above shows performance per calendar year.
Growth investors, by definition, seek high-performing funds. This fund has a 10-year annualized return in GBP of 30.77%. In shorter time frames, the 5-year annualized return in GBP is 7.06%, while the year-to-date return in GBP is -21.57% (as of October 31, 2022).
Guinness Global Innovators performance since inception (2014) in GBP as of September 30, 2022. Performance prior to its launch on 2014 reflects the Guinness Atkinson Global Innovators fund, US mutual fund with the same investment process since 2003. The bar graph above shows performance per calendar year.
The chart above depicts the fund's performance since the inception of its strategy, which has now returned more than 800% of profits! Therefore, someone who invested $100,000 in the Guinness Innovators fund at the beginning of 2003, would have grown its value to more than $800,000 by the end of October 2022.
The fact that this strategy worked during the 2008 global financial crisis shows that the fund is resilient to major economic downturns. We can also see that when the markets are down, as they were in 2008, 2011, 2018, and currently in 2022, the fund consistently underperforms; however, when the markets are up, the fund generally captures more of the upside.
This is due to the fund's reduced exposure to defensive sectors such as utilities, staples, and energy this year, and more aggressive exposure to information technology. And, as we can see from the years 2009, 2012, and 2019, the fund has bounced back strongly after each major correction. We believe that because the fund's strategy is consistent, when the market recovers from the effects of the ongoing war, rising interest rates, and inflation rates, the fund will bounce back and outperform the market.
Consistency
The fund was launched in 2014 and has since then been managed by Ian Mortimer and Matthew Page. The process is clear, robust, transparent, and scalable. It removes much of the noise and hype surrounding companies to focus on the true signals that drive company valuations. The managers attempt to avoid some of the behavioral biases associated with being unduly influenced by market sentiment by conducting their own company research and analysis, using their own proprietary modeling systems. Because the fund has been managed by the same fund managers since its inception, there has been no major structural change that has affected fund performance.
Another point to emphasize is that the fund managers actively provide fund reports and updates every quarter and as needed. Constant communication allows our investment team to evaluate the fund and provide a complete picture of what is going on with the fund.
Selection
The Fund is a concentrated portfolio of around 30 equally weighted stocks. The fund managers prioritize 'bottom-up' stock selection* rather than making decisions based on an expected global economic outlook. They prefer to invest in companies that can provide an above-average return on capital.
We believe that innovative companies should achieve a higher return on capital than their peers because of increased sales and lower development or production costs over time.
* Bottom-up stock selection typically involves focusing on a specific company's fundamentals, such as revenue or earnings, versus the industry or the overall economy. The bottom-up approach assumes individual companies can perform well even in an industry that is underperforming, at least on a relative basis (Investopedia).
The fund managers prefer to invest for the long term and will typically hold a company in the portfolio for 3 to 4 years, lowering the cost of trading in and out of companies.
In the third quarter of this year, four of the fund's top ten holdings produced positive returns, with PayPal being the quarter’s top performer.
Information Technology stocks are generally riskier than other types of stocks, but they also promise significantly more growth. They are worth investing into because they exhibit strong growth, including revenue growth and stock price growth. Another is that their fundamentals are sound. They exhibit profitability and a sustainable balance of assets to liabilities. Most importantly, their products and services have strong market growth potential.
Our View
Even though the technology sector has been the worst performing sector this year due to interest rate hikes that make it difficult for businesses to borrow, we believe that this fund will perform well once the interest rate hikes subside. The fund has a good track record in stock selection and invests in profitable and innovative companies that will outperform over time.
Our investment team is in constant communication with the fund managers, which gives us confidence to recommend this fund due to its nearly two-decade-old proven strategy that has delivered outstanding performance.
We've also started a policy of holding meeting with clients one-on-one to discuss their individual portfolios. We would be delighted to set up a call with you to discuss your investment with us and how our views on the Guinness Global Innovators Fund and markets in general might affect your investment.