Zverev, who manages the £110m Standard Life Global Equity Unconstrained fund, says the raft of macro worries currently circulating in global equity markets are over stated.“Many global stock pickers worry too much about having a macro view. It is easier to be a macro driven investor but it means you rely on your own judgment [of global sentiment],” he said.
“Stock selection is the biggest driver of returns and the most repeatable.”
FE Trustnet recently highlighted that more than 75 per cent of funds in the IMA Global sector had failed to beat the MSCI World index over three and five years.
Performance of sector and index over 5yrs
Source: FE Analytics
Geopolitical risk, the Fed’s tapering of its quantitative easing programme, sluggish European growth and an expectation of rising interest rates have often been mentioned of late as significant headwinds for equity markets over the near term.
While many managers and investors have been taking money off the table and reducing risk over the course of the year, Zverev says finding opportunities for both growth and value stocks has not become harder, despite rising markets and valuations, especially in developed markets.
“People say it has been a really bad year for active managers but even looking at valuations I do not agree.”
“If you have the resources and the attention to detail to look at the underlying businesses there is always something going on. Opportunities are as a good as they have ever been. Because we are not led by macroeconomics – we are aware of risks – we are not put off regions or sectors because of concerns to the prevailing macro trends.”
“There are always things to be worried about but companies tend to keep doing their thing and you don’t find them changing materially.”
Like the other funds carrying Standard Life’s ‘Unconstrained’ brand, Zverev is allowed to take a benchmark-free approach.
The manager targets stock-specific opportunities where he believes he has “non-consensus insights”.
Since the manager took over the fund in July 2010 it has returned 78.28 per cent compared to an average return in the IMA Global sector of 50.73 per cent. The MSCI AC World gained 61.45 per cent.
Performance of fund, sector and index since July 2010
Source: FE Analytics
The fund has also had a strong performance in 2014 so far, scoring a top-quartile return of 8.25 per cent.
Zverev says most of this outperformance comes not from sector or style calls but from stock selection.
Despite the fund’s outperformance it has proven more volatile than the average fund in the sector and the MSCI AC World, since Zverev took the helm.
It also has one of the highest betas in the IMA Global sector, meaning that its performance is likely fluctuate further as the market moves, but in the same direction.
It also has high alpha. This has seen it score a top quartile return in every calendar year since the manager took over except in the weaker market conditions of 2011 when it lost 9.48 per cent compared with a 6.66 per cent dip in the MSCI AC World.
The manager has an underweight position in North America, with just 47.1 per cent of the fund exposed to the region.
However, the US weighting has been steadily creeping up since Zverev took over the fund, rising from just over 20 per cent in 2011 to its current level.
The largest sector weighting is to consumer products which makes up 25.1 per cent of fund’s positioning. This has switched over the course of 2014 with the manager previously holding an overweight in US tech names such as Google and eBay, which both occupied top 10 positions earlier in the year.
The fund’s largest holdings currently include Halliburton, Roche, Samsung and Lazard.
Despite the manager’s sanguine outlook he says some macro worries are too big to ignore.
“The biggest thing we worry about day in, day out is the China transition. China has this real challenge of transitioning from an investment and export-led economy to being a consumption-led economy.”
“It is hard to do, takes time and requires plenty of control in the system to make it relatively pain-free. It is something we watch very carefully.”
The manager says such concern led him to recently sell out of Prada after buying it earlier in the year.
“It turned out to be a mistake,” he said.
The fund requires a minimum initial investment of £500 and has ongoing charges of 1.74 per cent.
