Originally launched in the US in 1983 with at around $22bn in assets, Capital Group rolled out a Luxembourg-domiciled Ucits version of the product in Asia in November. The fund was launched on DBS Bank’s platform earlier this year in both Hong Kong and Singapore.
The fund is a growth-oriented global equity strategy that invests in companies that can benefit from innovation, exploit new technologies or provide products and services that meets the demands of an evolving global economy.
Traditionally, most mutual funds that are managed by a group of managers will have a lead PM having the final say of how the portfolio should look like. However, unlike most managers, Capital Group has taken a different approach for its New Economy product, according to Andy Budden, Singapore-based investment director at Capital Group.
Budden explained that the offering has six portfolio managers and an investment analyst, each managing a different sleeve of the fund. He noted that the vast majority of the money is managed by the portfolio manager.
“Each portfolio manager is given a sleeve of the fund and they pick their own stocks and build their own portfolios in that sleeve. After that, we put the sleeves together to create one fund,” he told FSA recently.
The Capital Group New Economy Fund
He noted that the strategy also does not make use of a voting approach, in which PMs vote for which stocks should go into the portfolio.
“The reason why we do not use a voting approach is that starts to become a committee consensus approach, and committees are not good at making high-conviction accountable investment decisions,” he said.
Diversified portfolio
While each manager will have the same goal of creating a global portfolio consisting of growth-oriented companies benefiting from innovation, they may have some slight differences when it comes to their investment styles.
“Each sleeve is not divided by sector or geography,” Budden said. “But some of them have slightly different approaches. For example, several of them are very strong growth managers, while one or two are focused on cash flows and dividends. For one PM, the most important factor is management,” he said.
Although there will be some overlaps in terms of stock selection, the resulting portfolio consists of around 200 names, with nearly half of them consisting of small- and mid-cap companies.
“So instead of having a 20-30 stock portfolio managed by a single manager, this fund brings the best ideas from several managers. Each of them brings unique positions and ideas in the portfolio.
“Taken individually, each sleeve tends to be volatile, but when you put them together it becomes a stronger product,” he claimed.
Top 10 holdings
On a year-to-date basis, the fund has become less volatile than its index, the MSCI ACWI Index, according to data from FE Fundinfo. It has also performed better than its benchmark and is on positive territory during the period.
|
YTD volatility |
YTD performance (%) |
|
| Capital Group New Economy Fund (Lux) |
36.82 |
6.33 |
| MSCI ACWI Index |
39.56 |
-3.71 |
Source: FE Fundinfo
Budden noted that the fund is not a tech-focused product. Only around a quarter of the fund’s assets is invested in the IT sector, with the remainder invested across other industries, including consumer discretionary, healthcare and financials.
In terms of his outlook, Budden is positive on the companies that are exposed to the new economy.
“In the last five to 10 years, there has been a nice steady tailwind behind digital transformation and digital disruption. What has happened now during the pandemic is that that tailwind has accelerated into gale-force winds.
“There continues to be enormous growth potential. For example, cloud computing now only accounts for $60bn of the yearly global IT spending of $1.3trn. For streaming videos in the US, about 90% of American’s everyday viewing is still on traditional linear TV, so streaming videos is actually less than 10% of their viewing.”
The Capital Group New Economy Fund versus its benchmark index and sector in Hong Kong
