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Top of the pops

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The global outlook has turned murky once again. From going into recovery mode out of lockdown, economies around the world are on alert given the high transmission rates of the Delta variant.

  • The Delta variant, which accounts for more than 90 per cent of COVID-19 cases in the United States, has picked up new mutations and broken off into a few subtypes, which are being classified as Delta Plus. In the UK, the Delta variant was found to be totally dominant. And so, the dominant theme on Wall Street right now is concerns surrounding Delta, and its impact on both the reopening trade and the economy in general.

    Investors have been positioning their portfolios to capture upside potential from inflationary pressures and a shift towards cyclical and value-oriented asset classes. Global funds have opened a window of opportunity to capture international assets and diversification. Growth stocks had been winning the battle amid low interest rates and tech disruption. At least until this year, when vaccines started global distribution, reducing COVID-19 cases in the US, triggering an economic recovery. This caused value stocks to rise and growth to taper off in early 2021.

    Here are my top five growth strategies for 2021-based on 12 month performance and importantly size. Funds below $200 million in assets under management have been excluded, in favour of those with more established and resourced models.

    Fund name APIR Sector 3M 1YR
    Hyperion Global Growth Companies C WHT8557AU Equity World Large Growth 9% 42%
    Generation Wholesale Global Share FSF0908AU Equity World Large Growth 10% 40%
    Loftus Peak Global Disruption MMC0110AU Equity World Large Growth 12% 38%
    T. Rowe Price Global Equity Open ETL7771AU Equity World Large Growth 10% 35%
    Franklin Global Growth I FRT0010AU Equity World Large Growth 10% 34%

    Named Fund Manager of the year seemingly every year, Hyperion Asset Management needs no introduction. Having taken out award after award, the Hyperion Global Growth Companies fund stood head and shoulders above the rest, managing a yearly return of 42% with some $1.04bn in FUM. Growth clearly outperformed value for the majority of the year. Hyperion was able to ride the growth boom by making big bets on growth companies such as Tesla (NASDAQ: TLSA), which returned +134.3%, Square (NYSE: SQ) +85.8% and PayPal (NASDAQ: PYPL) +37.1%.

    Contributors Price change (%) Avg Weight (%) Contribution to return (%)
    Tesla Inc. 134.3% 12.1% 15.0%
    Square, Inc. 85.8% 10.0% 8.8%
    PayPal Holdings Inc. 37.1% 7.3% 2.5%
    Alphabet Inc. Class  A 76.7% 3.4% 2.2%
    Microsoft Corporation 35.6% 5.0% 1.9%

    In second place was the Generation Wholesale Global Share fund, managed by US firm Generation Investment Management, and distributed by Colonial First State. It is an actively managed, high-conviction global share fund that takes advantage of long-term sustainability and economic trends to deliver superior investment returns. The fund’s size is growing and sits at around $773 million, with stocks such as Equifax Inc +1.40%, Gartner Inc +0.92% and Alphabet +0.88%. 

    In third place, the Loftus Peak Global Disruption fund was able to return 38%, with big tech winning again. Loftus Peak is a smaller-sized global fund manager, roughly $209 million, with a focus on in listed disruptive businesses that are driving change across all industries globally. Holdings in the fund include the big tech names like Apple, Google (Alphabet) and Alibaba.

    T. Rowe Price’s Global Equity Fund was in fourth place. The $606.3 million fund returned 35% for the year, and does this via a highly diversified portfolio of global companies. Again, its holdings are a clear picture of the fund riding growth over value via the tech giants. Here are the top 5 stocks Amazon – 2.8%, Alphabet – 2.7%, Facebook – 1.7%, Alibaba Group Holdings – 1.2% and Evotec – 1.2%.

    And finally, Franklin Global Growth fund, worth about $1.11 billion, returned 34% for the year. The team picks stocks on a fundamental bottom-up basis to identify quality growth companies. This fund is somewhat different to the other growth funds in that it isn’t tech-heavy, holding US stocks in the healthcare, biotechnology, retailing and banking space. It’s top 5 holdings are Charles River Laboratories, Intuitive Surgical and Mercadolibre.

    Without doubt, growth funds easily outperformed value. Given low interest rates and strong corporate earnings, growth stocks have easily outperformed value stocks that appear to be undervalued in the marketplace. That raises the question, is it better to invest in growth or undervalued value stocks?  Each has its merits and powerful points. Each has its own fans. Overall, the growth vs value debate all boils down to the economic conditions at play and which style can exhibit above-average returns. At the moment, growth looks to be winning.

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