14 FEB, 2022
By Constanza Ramos
It is Valentines day, and we wanted to celebrate love the best way we know, and that is by asking the professionals. On this occasion we wanted to ask fund selectors about the funds they can take out of their minds, and therefore, the ones they consider “keepers” at the moment, and they are planning to keep in their portfolios for a while.
We have asked Gianluca D’Alessio, Head of Portfolio Management at Farad investment Management and Salomé Bouzas, Investment Analyst at Tressis to tell us about their current “Keepers”.
|ISIN||Investment fund||Category||Returns 3 years annualised|
|LU1127969597||T.Rowe Global Focused Growth Equity||Global Large-Cap Growth Equity||22.50%|
|LU0195953749||Templeton Global Climate Change Fund I||Sector Equity Ecology||15.04%|
Data: Morningstar 11/02/2022
Investing in growth is often confused with investing in defensive sectors when, in reality, we can find growth companies in almost any industry. While we are used to funds with a growth bias being primarily positioned in technology, healthcare or consumer discretionary, T.Rowe Global Focused Growth Equity allows us to be exposed to companies with such growth expectations without such strong sector dispersion thanks to its characteristic focus on the economic return generated.
Qualitatively, they look for companies in attractive industries that benefit from the economic cycle, along with relevant market positioning and scale, strong pricing power and attractive reinvestment returns. In other words, they combine a positive outlook on business fundamentals with growing economic returns. However, they believe that valuations must also be taken into account, especially at the extremes, by not investing in what they consider “unjustifiably” expensive or cheap. This process allows them to identify opportunities across the universe, limiting sector dispersion versus the global index and largely leveraging their alpha generation on company selection.
In the current environment, where we continue to rely on growth stocks, but where changes in sentiment, sector or style rotations occur from one day to the next, we believe it is essential to have a fund that allows us to bet on one style of investment without eliminating certain sectors from its scope.
Climate change: a tale of love and deep challenges for the fund industry.
Last November COP26 came short of expectations, but an increasing number of fund are declaring to include a focus on climate change within their investment strategies. However, it is worth to be able to select the sustainable funds which well suits the current inflationary framework in a value-style oriented market environment.
Climate change investors seek out opportunities presented by this changing landscape. The transition to a low-carbon economy brings several inflationary drivers that have not been present over the last two decades. Two issues have drawn increased investor attention over the last year: the sharp spike in the price of commodities, and a renewed global commitment to fighting climate change.
The fund Franklin Templeton Investment Funds – Templeton Global Climate Change Fund I (Acc) EUR (ISIN LU0195953749 – “FT Climate Change” hereafter) holds the perfect investment strategy and focus to lead investors into this sustainable transition environment.
As key differentiators versus peers, FT Climate Change has a more disciplined valuation approach (with a focus on avoiding buying into “hype”), and it focuses on a broader sector exposure than peers with high weights in Industrials and Materials, which are typically high carbon sectors (while peers generally reliant on Tech, particularly FAAMG stocks). As two of the highest emitting sectors globally, picking companies with a sustainable competitive advantage within industrials and materials sectors is important and it could lead to have the greatest positive impact on climate change, as these sectors address several of the UN’s Sustainable Development Goals (SDGs) that are relevant to climate change, such as “Climate Action” and “Industry, Innovation and Infrastructure.” Furthermore, FT Climate Change holds a global exposure (vs US-heavy peers) accessing a wider opportunity set, and it keeps a consistent overweight to Europe, which makes sense both on extra-financial perspective, as Europe is ‘leading’ on the issue of Climate Change, and as macroeconomic perspective in the medium to long term, in which Europe seems having a better framework compared to US in the current inflationary environment.
The fund is classified Article 9 SFDR, it received Febelfin label and it released a quarterly impact reporting with a detailed focus on the UN’s Sustainable Development Goals (SDGs) alignments, which we at FARAD IM consider as crucial for a sustainable fund, and it is included as a core step in our ESG scoring system, called GreenEthica Sustainable Scoring System (GSSS).