In 2021, STANLIB Asset Management entered into a strategic offshore partnership with J.P. Morgan Asset Management (JPMAM) to provide local investors with more global opportunities.

The STANLIB Global Select Fund is sub-managed by JPMAM. It invests in the high conviction ideas globally from JPMAM’s team of career research analysts, following an investment discipline that has delivered consistent returns for over thirty years.

This process benefits from the team’s focus on proprietary long-term earnings and cash flow forecasts to capture the opportunities arising from current structural and cyclical changes across industries.

Key fund takeouts included:

• Global expertise meets local insights
  The STANLIB Global Select Fund is managed by two highly experienced London-based JPMAM portfolio managers. They’re backed by a team of around 80 career equity research analysts around the world following an investment discipline that has been in place for more than three decades.
• Proven results
  Over the five years to 30 September 2024, the fund has delivered 17.04%* compared to the MSCI World Index’s 13.04%
• High conviction, fundamental research-driven, active management
  The fund invests in the high conviction ideas globally from JPMAM’s analysts, with a focus on long-term forecasts to capture opportunities arising from structural and cyclical changes.
• All weather portfolio able to perform in a variety of market environments
  It invests in a core, broadly sector-neutral, “all weather” portfolio, able to perform in a variety of market environments, focusing on JPMAM’s analysts’ strongest stock recommendations, globally, in each sector, with a risk-control overlay.

The fund is available in US dollars and as a rand feeder fund.

Global equities have already anticipated a soft landing

A consistent and prolonged period of interest rate cuts in major global economies lies ahead, creating a strong environment for equity markets, according to Amit Parmar, investment specialist in J.P. Morgan Asset Management’s International Equity Group.

Equities have already priced in a “soft landing” for the US economy and investment flows into equity markets have been sustained, even after periods of short-term volatility. While US consumers have largely spent the savings they accumulated from the Covid pandemic’s monetary stimulus, European consumers still have savings. In general, across developed markets, savings and corporate balance sheets are resilient.

The J.P. Morgan Asset Management International Equity Group sub-manages the strategy of the STANLIB Global Select Fund. The STANLIB Global Select Fund provides core, all-weather exposure to global markets, with strict risk controls and experienced portfolio managers, drawing on an extensive global research team. Since November 2015, this strategy (which has been offered by STANLIB for just over a year) has delivered 2.52% p.a. (gross of fees) above its benchmark, the MSCI World Index.

The strategy uses a proprietary measure of business quality where the highest ratings assigned to companies are Premium and Quality. As at the end of September 2024, the portfolio is 23% overweight in Premium and Quality stocks. This overweight has come down slightly in the third quarter as more money has been allocated to attractively-valued opportunities. The top 10 holdings in the STANLIB Global Select Fund include Amazon, Microsoft, Meta, LVMH and Mastercard. Otis Worldwide is a new addition and Nvidia has moved into the top 10 as the fund managers have bought into dips.

The excess return is primarily driven by stock selection. Parmar says the managers do not overpay for companies – they are stock pickers who focus on those companies that can deliver strong cash flows and long-term earnings growth. The fund has been overweight in semi-conductor stocks this year but that weighting is being reduced. It maintains an overweight in companies such as Amazon, Microsoft and Meta, which fit into the higher growth, defensive category. It is underweight in low growth, cyclical businesses that are affected by interest rates and industrial cycles, e.g. banks and commodities. The managers are building up positions in defensive sectors such as health care, insurance and consumer staples.

The fund takes intra-sector risk rather than making big calls on sectors compared with the benchmark, the MSCI World Index. Regionally, the fund is overweight in emerging markets ex-China (owing to no emerging markets in the benchmark) and Europe ex-UK but many of its holdings are multinationals where they derive their revenues globally.

Although Eurozone growth is weak, and there is an increasing likelihood that the region will move into recession, Parmar says there are still some great European companies and consumers are fairly resilient. One of the issues facing the Eurozone is that the competitive edge in its largest economy, Germany, is being threatened by Chinese manufacturing, e.g. in automobiles. But there are pockets of optimism – for example, one of the fund’s biggest holdings is luxury goods group LVMH.

Currently, there is no direct Chinese exposure. Parmar says Chinese equities are relatively attractive on a pure valuation basis, but for a reason. The recent announcement of fiscal stimulus by the Chinese authorities caused a short-term lift in Chinese equities, but it will be very difficult for the authorities to resolve some of the systematic issues in the region in the short term. There is little room for further infrastructure investment and it will not stimulate commodity prices. The fund holds stocks such as Hong Kong Exchange, Otis and AIA, which will benefit from growth in the Chinese economy, but there are hedges in place.

Ahead of the US election, the fund remained balanced in its overall positioning and the managers did not take positions in anticipation of policy changes. Fundamentally, the US economy continues to deliver robust growth, especially compared with other developed markets and more in the services sector than in manufacturing. In the third quarter there were increasing concerns over earnings delivery and investors became more cautious about the high-tech companies expected to benefit from artificial intelligence. Some of the overvalued sectors have pulled back and multiples have corrected to more reasonable levels.

Parmar says some of the top 10 stocks in the S&P 500 index are trading on elevated valuations, but where the managers believe they can continue to grow they have maintained their exposure. Among the other 490, valuations are more in line with global averages and some companies are at attractive levels. The fund managers have initiated a position in Tesla, based on its appealing valuation and some of the progress it is making in, for example, the robo taxi industry.

Parmar says the successful track record of the STANLIB Global Select Fund is based on its best-in-class research platform, highly experienced portfolio management team and data/technology advantage, using J.P. Morgan Asset Management’s proprietary investment platform, Spectrum. Consistency of performance is derived from its disciplined investment process.

*Source: J.P. Morgan Asset Management. Performance results are for JPMorgan Global Select Strategy composite shown in USD, gross of investment management fees and annualised. Performance returns indicated are historic returns of the underlying strategy and are provided for illustrative purposes only. Past performance is not a reliable indicator of current or future results.

J.P. Morgan Asset Management (UK) Limited is an offshore strategic partner to STANLIB Asset Management (Pty) Ltd and is authorised and regulated by the UK’s Financial Conduct Authority.