David Polak, Capital Group
It might seem like a formula for discord and confusion: a $70bn mutual fund with seven independent portfolio managers scattered across the world, and with 80 stock picking analysts directly responsible for 20% of its assets.
Yet, the Capital Group New Perspective Fund, a global equity product, has been run in this diffused, pluralistic fashion for 45 years.
A $4bn version of the fund was launched in Hong Kong and Singapore in December 2015 – the Capital Group New Perspective Fund (LUX) – which exactly replicates its giant parent’s portfolio.
Macro risk
The fund’s investible universe is made up of companies that earned at least 25% of their revenues outside the US.
The emphasis has always been on growth. There is a now a bias towards large cap “new economy” stocks in the internet, communication services and biotechnology sectors.
Top holdings include Amazon, TSMC, Alphabet, Microsoft and Facebook, and the fund is also exposed to Tencent and Alibaba indirectly through investments in Naspers and Softbank, respectively.
“Positions are taken after detailed bottom-up fundamental analysis and held for a long time. One consequence is that the fund’s performance can suffer when there is a major macro event,” David Polak, senior vice president and investment director at Capital Group told FSA on a recent trip to Hong Kong from his New York base.
Examples in the past include the economic ascendency of Japan in the 1980s, the rapid succession of US interest rate hikes in 1994 and the Eurozone debt crisis in 2011.
Polak pointed to future potential vulnerabilities: a spike in US interest rates, a deterioration of the US-China trade dispute, escalation of geopolitical tensions or a steep drop in global economic growth.
Variety of managers
The fund has achieved a 49.66% three-year cumulative return, exceeding its MSCI AC World benchmark by three percentage points. Its annualised volatility is slightly higher, at 11.88% compared with 11.39% for the index, according to FE Analytics.
Los Angeles-based Rob Lovelace is the designated principal investment officer for the fund, making him accountable for the fund’s operations, but sharing responsibility for investment choices equally with his co-managers.
“They have spent an average of 25 years at Capital Group, are personally invested in the flagship fund and their bonuses are contingent on long-term performance,” said Polak.
“Moreover, one-fifth of the fund is effectively handed over to the individual analysts who specialise in one or two industrial sectors or countries. They get to choose a couple of stocks each, and their choices may or may not be taken up by the managers of the other 80% of the fund,” he said.
Concentration risk is mitigated by explicit restrictions such as a 5% cap on individual stock positions and 15% limit to emerging markets, as well as daily monitoring by a global investment committee, he added.
Capital Group New Perspective Fund vs sector and benchmark
