Please refer to the glossary for an explanation of the investment terms used throughout this article.
The next era in the evolution of the M&G Global Basics Fund is under way. After shareholder approval of proposed changes to the fund’s objective and investment policy, we believe the manager, Jamie Horvat, can now take full advantage of new themes in an ever-evolving global economy.
From November 2000 until November 2013, the M&G Global Basics Fund was managed by Graham French. Its aim was to assess structural trends in the global economy and identify companies that were positioned to benefit from those trends.
Until recently, a large number of these companies either operated in basic industries (‘primary’ and ‘secondary’ industries such as mining and manufacturing), or serviced them.
Many of these companies were exposed to emerging markets, being economies in the throes of industrialisation, and the rising middle class in those countries. Furthermore, the fund had a significant exposure to commodities.
This focus served the fund well for many years. However, the global economy is constantly evolving. Markets are very different now from 20, 10 or even five years ago. In recent years, new global investment themes have developed such as growing demand for healthcare and medicines to support an ageing population.
Until now, the fund manager has been limited in his ability to capitalise on some of these new themes by a requirement for at least 70% of the portfolio to be invested in basic industries or companies that service them. The fund’s lack of exposure to these new themes has recently hampered performance at times.
Following the removal of the ‘basic industry’ restriction by shareholder vote, we believe that Jamie Horvat – who took over as manager of the fund in December 2015 – will be able to take full advantage of the wider range of themes now developing in the global economy.
The value of investments will fluctuate, which will cause fund prices to fall, as well as rise, and you may not get back the original amount you invested. We are unable to give financial advice. If you are unsure about the suitability of your investment, speak to your financial adviser.
On 17 November 2017, the fund changed its name, objective and policy, and performance comparator. The new performance comparator is the MSCI All Country World Index.
The philosophy of the fund – exploiting global structural changes – remains the same. Jamie believes current and future trends can be found in any sector, size or geographical area and that the fund would be at a disadvantage if it continued its focus on basic industries.
Through the analysis of global macroeconomics, demographics and government policies and spending, among other considerations, the aim is to invest in companies that will benefit from positive structural changes in the global economy.
At present, Jamie is focusing on four main themes:
Figure 1. Current area of focus
Source: M&G, for illustrative purposes. Subject to change over time
Jamie’s investment process involves firstly identifying themes arising from long-term structural shifts. Company stocks that can benefit from these themes are then selected on the basis of their quality, growth and valuation.
Jamie looks to identify companies that:
The fund is invested across all sizes of companies and is geographically diversified.
We believe that with the fund’s objective and investment policy revised to match today’s opportunities and challenges, Jamie will be able to take fuller advantage of new themes in the global economy and continue to deliver strong results for investors.
Please note that there is no guarantee that the fund will achieve its objective, and you may not get back the original amount you invested.
This fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.