The Rise and rise of the Foord Global Equity Fund
The Foord Global Equity Fund performed extraordinarily well in 2020, which was an extraordinary year by any measure. Portfolio manager Ishreth Hassen reviews the fund’s index-beating performance.
At the start of 2020, global share markets were at or near all-time highs, having delivered the best calendar-year return of the decade in 2019. No one could have predicted the impact of the pandemic on economies and businesses as COVID-19 tipped the world into an economic contraction twice as severe as the 2008/2009 Global Financial Crisis.
The new year delivered the most volatile period in modern investing history. Global share markets quickly fell by a third before recovering on unprecedentedly massive monetary and fiscal stimulus and hopes that the year-end vaccine roll-out would herald a return to normal. Against this backdrop, the Foord Global Equity Fund returned 23.6% in US dollars (after fees and costs), dramatically outperforming the MSCI All Country World Equity Index, which posted a return of 16.3%.
In our view, this alpha (or outperformance) was neither random nor speculative. Our focus on the assessment of value relative to expected future earnings had resulted in a portfolio of under-valued, high-quality businesses with strong leadership teams across disparate sectors and markets. This strategy has proven to be an effective hedge against most market stresses. Last year was no different.
All Foord funds are constructed independently of the benchmark we are trying to beat over time. Excellent stock selection was the cornerstone of the Foord Global Equity Fund’s outperformance. The fund’s top performance contributors were: China’s second-largest e-commerce and logistics business JD.com, copper mining giant Freeport-McMoRan, cutting-edge fibre laser producer IPG Photonics, biotech star BioLife Solutions and Chinese internet giant Tencent.
These companies are among the best managed businesses in their industries. Each is very different from the rest, reflective of the diversification within the portfolio. It is notable that none of these stocks are constituents of the MSCI All Country World Index information technology (IT) sector, which was the best performing sector of the year. Nevertheless, they all meaningfully outperformed the IT and other sectors.
Risk management was also critical to the fund’s success in 2020. The portfolio spans key markets and sectors based on the managers’ conviction of the future earnings of the businesses we own. In many cases, our expectations were very different from the market’s.
For example, we hold different views on the speed of technology adaption, the sophistication and growth of the Chinese middle class and the state of commodity cycles like agriculture, precious metals and copper. Last year, the market closed the gap on some of these views to the benefit of our investors. Our portfolio construction has already adjusted accordingly.
The fund management team expects great things with the recent appointment of Jing Cong (JC) Xue as a multiple-counsellor manager on the Foord Global Equity Fund. JC hails from Singapore and has been instrumental in the team’s extensive coverage of consumer discretionary, information technology and communication services sectors since 2017.
Foord’s commitment to investment stewardship and risk management underpins all that we do. While the future direction of markets is murky, our focus on long-term earnings growth will continue to serve as the guiding light in our quest for value and alpha.