The STANLIB Global Select Fund is a core all-weather global equity portfolio, with research analysts and managers on every continent researching companies and industries and tying that to long-term assumptions. The fund's managers do not make macro calls - their competitive edge is the long-term earnings and cash flow forecasts for the over 2,500 companies they cover. The fund has been in the fourth percentile in the last 10 years and has delivered a 10-year annualised composite return of 1.3% ahead of the MSCI World Index benchmark in growth and value environments, but its recent performance run has come under pressure in a relatively extreme environment.
One of the main reasons is the profound effect of AI, which has changed all walks of life and led to a wider range of performance outcomes . The fund typically invests across a range of outcomes. But now, for many companies, particularly in digital services, there is uncertainty on the downside.
The strong outperformance of high-momentum stocks has left relative valuations stretched. The STANLIB Global Select Fund generally favors quintiles where valuations are cheap, and companies with strong cash flows , and treads carefully in the fourth and fifth quintiles. It is currently 30% overweight in the cheaper valuation stocks.
But there are reasons to be confident about the future.
It is important to note that the recent drawdown is not unusual in a historical context , and the fund has consistently recovered from drawdowns during the dot-com boom and bust, the global financial crisis, and COVID . The current drawdown has been 10%, which compares with a median drawdown of 9% and a median bounce back of 13%. The fund's managers are comfortable this will happen again as they have come out of previous drawdowns and added more performance.
Since 2022, there has been a massive resurgence in tech earnings, with consistent 20% to 30% growth, compared to little growth or even an earnings recession in some sectors. This is changing, with a big capex recovery in the US and earnings growth of 15% to 20% across sectors such as financials, industrials, and utilities. There are similar positive signs coming out of Japan and Europe. If the oil price stays at this level, this recovery may be called into question, and geopolitics has also been an uncertainty. If oil tracks back, a pretty good cyclical recovery can be expected in the US.
Looking at tech investment, the fund's managers divide the tech universe into three : Hyperscalers, AI losers , and winners. Currently, digital services companies, including those involved in software, financial services, online gaming, and travel, are getting hurt as generative AI threatens to upend many traditional digital business models, making differentiated fundamental analyst insight critical.
Some companies are set to thrive amid AI disruption, such as Mastercard, where the likelihood of becoming an AI loser is very low, and it remains overweight in the portfolio.
Hyperscaler valuations have completely fallen off, providing a great opportunity as hyperscalers are at peak capital intensity as they build out infrastructure. J.P. Morgan Asset Management sees an inflection in cash flow growth from here. Large-scale capex is translating into revenue growth, and the free cash flow margin is expected to increase.
Positioning through opportunity and risk
The fund is overweight "pick and shovel" tech companies TSMC - the home of AI semiconductor manufacturing; NVIDIA - the undisputed leader in leading -edge training chips; Broadcom - a leader in low-cost ASICs through partnership with Google; and ASML - the key technological enabler through its EUV tools.
There are other opportunities in traditional industries and global defensives, including healthcare, utilities, and consumer companies . Cyclicals, however, are looking relatively expensive. The portfolio is marginally defensive, but the fund's managers expect a cyclical recovery and continue to pick the greatest winners based on the strongest valuation signals across high- and low -growth, defensive and cyclical stocks.
Acknowledging that there is some " irrational exuberance " in the market , which can be described as frothy, the fund's managers remain cautious.
Staying disciplined in uncertain times
Amid global uncertainty and market concentration, the STANLIB Global Select Fund continues to apply a proven, three- decade investment process focused on research depth, valuation discipline, and capital preservation.
The fund's consistent, style-agnostic approach seeks to capture long-term opportunities while managing downside risk. This disciplined process is designed to deliver stable performance across market environments , ensuring that investor portfolios remain positioned for the long term rather than driven by short-term sentiment.
To find out more about the STANLIB Global Select Fund, speak to your STANLIB Asset Management Investment Specialist or click the button below to find out more.
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.
