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What is the fund aiming to achieve for investors?

We’re aiming to achieve long-term capital growth through a diverse portfolio of large and midcap global companies. Now, because we’re not constrained by a benchmark, we can actually genuinely go and invest in all the parts of the world and all the sectors that we believe offer long-term investment returns.

What is your investment process?

Well the beauty of investing globally of course is that the investment opportunity is simply vast. Our investable universe consists of 5,000 of the world’s largest, most liquid companies. Now, clearly, with such a diverse opportunity set, then you can build as many portfolios as you would wish. Now, at Premier, we’ve decided to focus on key characteristics of investment that we think help to drive long-term outperformance.

Now, the first one of those is quality. So we believe that high quality businesses will tend to outperform the market over time. And by quality we’re looking for businesses with a strong track record of generating superior returns, they generate copious free cashflow, and management have a history of rewarding investors through growing the dividend over time and buying back shares. The second key characteristic we look for is value. So not only do we want quality companies but we want them to be attractively valued when we invest. We know that value again over the long term tends to drive outperformance of a particular investment. And the third key characteristic we want is superior growth prospects in earnings momentum.

So, once we combine all three of those characteristics — quality, value, and growth — we believe that we get a very, very strong source of outperformance, and also one that’s very consistent and robust over time. Now, identifying the highest quality, most attractively valued, highest growth businesses out of a universe of 5,000 can be quite tricky. We’ve solved that problem by incorporating all the financial data on all 5,000 companies that’s available globally and running it through a proprietary screening model. Now here we’re looking to rank each company on each of these, quality, value, and growth, characteristics, and we will seek only to invest in the very highest combination of all three of those characteristics. So really the screening process is purely there to point us in the right direction of potentially very strong investment ideas.

At that point myself and the global team will undertake traditional in-depth fundamental analysis on each of these potential investments. We’re really looking to understand these companies, what makes it a high quality business, what’s driven returns over time, and do we believe that this quality franchise is going to grow into the future, and do we think that now is the right time because the valuation is sufficiently attractive. Once we’ve ascertained that yes we really like this business, we think as a standalone stock specific investment idea, it’s very attractive, then we will perhaps look to put it into the portfolio.

What are the key economic themes affecting the global markets?

So 2015 will be an interesting year, because it’s the first year since the financial crisis where monetary policy globally is beginning to diverge. So the US has seen a continuation of the strong economic recovery that they’ve been experiencing for the past few years. We’ve already seen the Fed wind up their quantitative easing programme towards the end of 2014, and market consensus would have us believe that US interest rates are likely to start rising at some point over the summer.

Now, in stark contrast, of course, we’ve seen the ECB in Europe begin quantitative easing in January, Japan has an ongoing very large quantitative easing programme, and even China, that is still experiencing relatively robust economic growth, is beginning to ease monetary policy as that growth is slowing and they’re experiencing a rise in bad debt.

Now the impact of on the one hand tightening US policy and loosening monetary policy elsewhere in the world has seen foreign currency markets experience exaggerated volatility already. So the dollar has been very, very strong. We also saw the Swiss franc rise very strongly as their central bank gave up defending its value against the euro, and on the other hand the euro and the Japanese yen particularly have been very weak.

Now the hope is for those economies experiencing very weak currencies is that this will stimulate domestic economic growth through exporting more of their goods overseas. Whether this actually comes to pass or not is still a moot point and under some debate for 2015, but the one thing that we do know from our past experience of US and UK quantitative easing is that printing money by central banks tends to support financial assets globally. So, whilst economic stagnation and deflation even may persist in Europe and Japan, the financial markets in those countries may very well be well supported by their central bank activities.

China, again, whilst growth is slowing, is still experiencing relatively robust growth, and we think actually the relative valuations of the China market are so attractive that again that will be quite an interesting market. Whereas the US, despite actually having one of the more robust economies, will perhaps struggle against having a very very strong currency, and actually having outperformed the global market significantly last year, then maybe the US market this year may find it rather harder to outperform.

What companies do you currently like and why?

Well, as I’ve mentioned before, obviously, we’re very interested in companies with a high combination of quality, value and growth; however, when it comes to portfolio construction, we do also like to invest in thematic trends in parts of the world where we think there are very strong long-term growth drivers.

For instance, healthcare is a sector that we’ve liked for many years now. In the US, Obamacare has enabled 50 million people or more who previously had no access to healthcare to now be covered by health insurance. Clearly this has been a very strong driver of growth for those writing the health insurance, and sure enough we own United Health in the US in this sector who have experienced much better growth than expected.

Technology is another area we find very attractive. The growth of mobile phones, tablets and just data usage generally has been very very strong. We own two companies in the States, Avago and Skyworks, who make components that go into all these devices. And regardless of whether it’s Apple or Samsung or a Chinese branded mobile phone or tablet, these components tend to be present, so they’re very very good ways to play the growth in this data usage.

As currencies have weakened against the dollar in Japan and Europe, then clearly this should benefit exporters in these countries. So in Japan, for instance, we own Minebea, who make technology components, and Asahi, who make beer, but both of them have a substantial proportion of their earnings overseas and outside of Japan, and clearly this has been a very strong driver of their earnings growth.

And as central banks continue to print money and drive down interest rates, then actually trying to get a decent yield from any other asset outside of equities has become very difficult. So, again, we’re looking for companies with strong dividends that are well covered by free cashflow, and in Europe for instance we own CTT and Bpost, who are the national mail services in Portugal and Belgium respectively. Now they’ve been recently nationalised so are undergoing a strong cost cutting programme, they generate a lot of free cashflow, and both of them yield over 5%, which relative to government bonds for instance is obviously very attractive.

And we also look for parts of the world that we think offer very very strong investment returns over the next few years, and currently we think that there’s really very deep value in China. Now, after underperforming for many years, as economic growth has slowed, this market stands out as really really relatively very cheap at the moment. And in China, for instance, we have investments in China Construction Bank, China Railway and Sound Global, and all of these will benefit from government investment into the domestic economy, into the infrastructure of China, yet trade at significant discounts to the world.

Why do you think this fund is currently a good opportunity?

Well because of our focus on quality, value, and growth characteristics, we think that our portfolio should tend to outperform in most normal market environments. The fact that our opportunity set is so large in a global universe means that we can always invest in companies that we genuinely believe offer strong investment returns, rather than being forced into areas of the world in the market that we don’t really want to invest in.

Important Information

This webcast is directed only at authorised financial advisers and professional investors. It is not intended for retail clients.

This webcast expresses opinions and provides information on underlying research and analysis, which may have been acted upon by Premier Asset Management or its associates for their own purposes. This webcast is for information purposes only and does not constitute advice. Reference to any particular stock does not constitute a recommendation to buy or sell the stock. Particular stock holdings may vary due to prevailing market conditions. Holdings information is available on the fund’s factsheet, available on the Premier website, www.premierfunds.co.uk. All references to past performance are no indication of future returns.

The methodology and calculations used by the companies or organisations that provide the fund or fund manager awards and ratings are not verified by Premier Asset Management and we therefore are unable to accept responsibility for their accuracy. Ratings and awards should not be relied upon for making an investment decision, nor are they an indication, promise or guarantee of future performance of a fund or fund manager. A free, English language copy of the Fund’s full prospectus, Key Investor Information Document and Supplementary Information Document are available on the Premier website or by calling us on 01483 306090. For your protection, calls may be monitored and recorded for training and quality assurance purposes.

A free, English language copy of the Fund’s full prospectus, Key Investor Information Document and Supplementary Information Document are available on the Premier website or by calling us on 01483 306090. For your protection, calls may be monitored and recorded for training and quality assurance purposes.

Issued by Premier Asset Management. Premier Asset Management is the marketing group for Premier Fund Managers Ltd and Premier Portfolio Managers Ltd, who are, authorised and regulated by the Financial Conduct Authority.