Subjally said his bottom up stockpicking approach has been subject to increasing pressure as frightened investors have piled into and out of stocks regardless of their individual merit, in recent volatile markets, and even more so in the last few months.
"Stock correlations have hit around 70 per cent, meaning all companies are trading in a similar pattern, so it makes it harder for our selected companies to shine," the manager, who favours a bottom-up approach, said.
Financial Express data shows the fund has underperformed its IMA Global Growth sector over one and three years. Over the longer time period it made losses of 3.2 per cent, while the average fund in the sector returned 2.1 per cent.
Performance of First State Global Growth fund vs sector over 3-yrs
Source: Financial Express Analytics
The fund has seen a high turnover in its top ten holdings this year, according to Trustnet Fundswire.
Subjally totally sold out of Proctor & Gamble this year, having previously held it in his top ten, and has made large cuts to his holdings in Computer Associates. Meanwhile, he sold off Novartis by May this year, before buying back into it.
High turnover among a fund's top ten holdings can suggest the manager has made poor investment decisions, but Subjally denies this has been the case. He says portfolio turnover has been driven by a strong sell discipline within the fund, and the majority of stocks have been sold because they’ve hit price targets, not because their prospects have changed.
"The reason for these buys and sells is that we bought in cheap, and then sold off when the stock hit our pricing target. We have a very clear investment process, and have to be disciplined," Subjally said.
He believes a stockpicking approach will return to prominence once the market has regained some sense of safety, and does not plan to alter his approach to suit momentum investing.
"After what has been a real financial roller coaster, things must become less volatile going forwards. Attention will return to equities, and that’s when we are set to get a boost," Subjally said.
The fund generally avoids direct emerging markets exposure, preferring the so-called advanced emerging markets instead. Korea and Taiwan, for example, provide a lot of investment opportunities for the fund, according to Perry Winfield who is also a portfolio manager on the fund. Its heaviest country weighting is in US stocks, and heaviest sector weighting is in financials. Subjally says banking is a core area for stock pickers.
"While many investors have been avoiding the sector, we must remember that we cannot have a strong global economy without a thriving financials sector," the manager said.
He added: "On a long term view, now is a good time to buy into strong financial companies. As the world emerges from recession, some banks will emerge as real winners, while some will be crippled.
"Lloyds and RBS, for example, have a huge amount of government debt, structural issues, funding gaps and a distracted management team. HSBC and JP Morgan, meanwhile, have a strong capital base and are set to exploit world growth when it returns."