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Guinness Global Equity Income

Elite Rated by FundCalibre

This fund aims to provide investors with both income and capital appreciation. The portfolio typically consists of around 35 equal-weighted stocks, which means that investments are very different from the benchmark index. Shares are generally held for three to five years. The managers focus on how well and consistently a company can use money to generate returns. They also have substantial freedom to entirely avoid countries and sectors they don’t like.

Company Description

Founded in 2003, Guinness Asset Management Ltd is part of the Guinness group of investment management companies, founded by Tim Guinness. Investment research and analysis is all compiled in-house and none of its funds are constrained by any benchmarks. The investment team is based in London, and the company is entirely management/employee-owned.

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Fund Manager

This fund has been co-managed since its launch in 2010 by Matthew Page and Dr. Ian Mortimer. Both studied at Oxford University, Matthew gaining a Master in Physics and Ian achieving a PhD. They joined Guinness Asset Management in 2005 and 2006 respectively. Matthew previously worked as an analyst for Goldman Sachs, whereas Ian began his investment career with Guinness.

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We both studied physics at Oxford, so we have a natural preference for good metrics rather than good stories. We try to find the clear signals among the noise of the market.

Matthew Page - Fund Manager

The Investment Process

The first screen requires a high minimum return on capital invested, for ten consecutive years, bringing the universe down from around 16,000 potential stocks to around 600. This targets those companies consistently creating value for shareholders through an entire business cycle. Subsequently, those with market value below US$1bn and with a high debt structure are filtered out, leaving the managers with around 500 stocks to analyse. They use an in-house model that identifies stocks trading at a discount relative to the market, their peers and their own historical price, with a focus on company-specific drivers of return. An exploration of company financials then brings them down to the selected 35 holdings for the portfolio. The managers use a one-in, one-out philosophy when it comes to adjusting the portfolio.

Risk

The fund’s volatility has been about average relative to its peers. There is no bias towards any particular investment style, which means the portfolio will be less affected by which style is currently in favour, dampening volatility. The managers avoid companies that are highly cyclical or highly leveraged. However, it is important to note that the risk of a single stock adversely impacting the portfolio is higher due to the low number of target holdings within the fund.

Our Opinion

This is a very concentrated fund, holding high quality stocks, that has consistently outperformed its sector. We believe the managers’ focus on first choosing the right companies, rather than filtering by dividend yield, gives them a greater chance of finding hidden stock gems. They look for growing, rather than high, income and the equally-weighted portfolio also sets the fund apart from many of its peers. The one-in, one-out philosophy means the fund stays up to date with the managers’ best ideas, because they have to consider the worst of their investments, rather than simply adding a position. We think this is a core global income holding.

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©2014 FundCalibre Limited. All Rights Reserved. The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not ,guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund or of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating.