Investing in global mega cap stocks gives investors diversification, risk mitigation and above average return prospects.
This is what we aim to give our clients through the Ashburton Global Leaders Equity Fund which invests in no more than 25 mega cap stocks. These are stocks you will recognise either by name or by the product or service they offer. In our offering, we have the Luxembourg-domiciled Ashburton Global Leaders Equity Fund and the recently launched Ashburton Global Leaders ZAR Equity Feeder Fund which is a rand-based feeder of the Luxembourg fund.
The idea or methodology of this offering is to deliver top quality mega cap stocks for clients to invest in.
We know that quality means different things to different people – so what does it mean to us? It is good cash on balance sheet characteristics with strong fundamentals, industry leadership, improving excess cash returns and improving total return characteristics with below volatility over time.
We also endeavour to mitigate risk through sector diversification. Within this service, we hold a variety of sectors such as financial services, technology, consumer staples and energy. We look to stocks that are leaders within their respective sectors. This also allows us entry into emerging markets without having to go to emerging market exchanges. For example, Nestle (a stock we currently hold) derives approximately 40% of its revenue outside developed markets. Within this service, we can also tilt the weightings depending on our views to income and dividend yields. You might want to hold a stock that gives you good dividends and income and expect less price movement, and hold another stock that gives to the prospect of strong price movement over dividends and income.
The year 2018 was a particularly tough year to manage money, with December being the worst month in 50 years for stock markets. What we found is that our Ashburton Global Leaders Equity Fund moved very much like a balanced fund protecting you on the downside but when the recovery came, the returns were stellar.
Our Ashburton Global Leaders Equity Fund has a .48% correlation (the lower the number the better and 1 is perfectly correlated) in rand terms to the JSE All Share Index. This gives you added risk protection to the volatility of the rand versus the four major currencies. To gather and grow one’s wealth and assets in a major currency is prudent. Purchasing power should be one of the first considerations when choosing to invest and accumulate wealth.
Other characteristics you attain when investing in large caps are:
- Large companies normally have good reputations and long operating models
- Access to detailed research and valuations
- They are less likely to encounter economic conditions that stop their businesses or render their business insolvent
- Under difficult conditions they typically have access to capital and debt
- They generally have the ability to exercise cash buy backs
These types of portfolios or funds that invest in mega cap stocks also don’t have liquidity constraints.
How do you invest in these mega caps stocks?
You can invest directly into the Luxembourg-domiciled Ashburton Global Leaders Equity Fund in dollars or sterling. Investors can invest directly in the Ashburton Global Leaders ZAR Equity Feeder Fund with a minimum lumpsum investment of R5 000, or R500 by monthly debit order.
For more on mega caps watch these videos