1. Can you give a brief overview of your strategy in terms of what you are trying to achieve for investors, your investment process and the make-up of the investment team?
The Swiss & Global Equity team aims to create value for investors by selecting 30 diversified companies across global markets. They seek to identify companies that have demonstrated high and stable Cash Flow Return on Investment (CFROI®. Source Credit Suisse HOLT) profiles in the past and that the team expects will continue to do so. These so-called "global leaders" tend to outperform the overall market by positively surprising it with higher CFROI® than it has discounted.
The experienced investment team has been stable over time - with four Senior Portfolio Managers also holding an analyst role - working together for over 15 years. They have been following the same simple yet unique investment process focused on singling out diversified companies with superior levels of value creation while applying ESG considerations in a holistic manner. The strategy offers a diversified and balanced exposure to sectors and geographies, which makes it less prone to sector or style rotations, with the majority of the relative performance having been historically driven by stock selection rather than country or sector allocations.
This is an all-weather strategy with a proven track record: the focus on quality companies with superior cash-flow generation profiles has historically led the strategy to outperform in downside market environments while also participating well in upward trending markets. The fund has indeed delivered robust annualised gross excess returns of around 4% versus the MSCI AC World index since its launch in 2010, outperforming in 11 years out of 13. The strategy has attracted investors' interest and has more than USD 2 bn in AuM, with a strong inflow momentum so far in 2023.
2. How are you currently positioning your portfolio?
The strategy is well positioned to navigate the current environment. GDP forecasts are pointing towards a growth recovery later in 2023 and for 2024, but would require an upward movement in business sentiment. The team would therefore expect quality companies exposed to structural growth trends, such as AI, healthcare or digitalization, to be less dependent on the economic environment. These "global leaders" also have strong fundamentals (low debt levels, solid balance sheets, strong pricing power and good ESG practices), providing higher and more visible earnings as well as better operating resilience than the cyclical and unprofitable growth parts of the markets. In the expected environment of higher interest rates for longer and easing but still persisting inflation, selecting companies with strong pricing power that are able to pass on price increases to better perform is key. Historically, the strategy has performed well when inflation was averaging above 2%.
3. Can you identify a couple of key investment opportunities you are playing at the moment in the portfolio?
Rather than trying to time the market in terms of styles, sectors or thematic the team focuses on seeking high and stable value-creation profiles. This has led to a diversified portfolio offering a balanced exposure to sectors and geographies - no large active bets - making it less prone to sector or style rotations, with the majority of the relative performance being driven by stock selection rather than country or sector allocations. However, the team also looks for growth opportunities and diversified secular growth trends. Currently, it sees investment opportunities in companies that are directly or indirectly benefiting from AI (semiconductors but also software), electrification (with demand for energy efficiency and electric cars) or healthcare (diabetes treatments and more targeted medicine).
Eleanor Taylor Jolidon is Co-Head of the Swiss & Global Equity Team at Union Bancaire Privée, UBP SA
