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How Zurich tweaks earnings growth in global fund
(Pictured: Patrick Noble)
Zurich Financial Services Australia has secured a model portfolio inclusion from a major institutionally owned dealer group, with its global share fund. The fund searches for earnings a little differently to those of other managers.
Rather than following investment norms by focusing on the overall level and duration of a stock’s earnings growth, the Zurich ‘global growth share fund’ – managed by US-based global active manager Century Investments – places more emphasis on changes in the rate of earnings growth.
In doing so, the fund seeks to find the ‘inflection point’ in a company’s earnings, therefore reducing the risk of overvaluing a stock.
“Price momentum in global markets over the past 12 months is welcome, and has naturally seen a resurgence of interest in international equities,” said Zurich senior investment specialist Patrick Noble.
“Yet many professional investors point to last year’s strong returns as almost exclusively due to the effect of multiple expansion, not necessarily supported by earnings growth.
“Zurich has brought exclusively to Australian investors a proven investment process that seeks to uncover inflection points in earnings growth”, he said.
Positive earnings surprises and changes in earnings growth rates can be very supportive of share price moves. According to Noble, markets are often slow to react to material changes in a company’s performance, and so are often unable to correctly estimate the degree and duration of the effects those changes will have on that company’s stock price.
“This represents an enduring market inefficiency which the fund process seeks to exploit, for the benefit of investors,” he said.
“While today’s macro environment is challenging, the process continues to identify numerous opportunities. Secular pockets of strength are evident in the shift of conventional media spend to online.
“Online e-commerce is also taking market share. In the fragmented global travel market, Priceline Group is an example of a company outperforming. With market leading brands such as Booking.com, Priceline has a solid history of growing its revenues well above that of not only the total travel market but also those of its online booking peers.”
Meanwhile, the fund has recently won a position on the Approved Product List (APL) of Westpac-owned licensee Securitor.
