220. Why a focus on capital gains can miss out on opportunities in income
Jason Borbora-Sheen, manager of the Elite Rated Ninety One Global Income Opportunities fund, takes a...
Ninety One Global Income Opportunities
Ninety One Global Income Opportunities fund invests conservatively around the world in a diverse range of equities and bonds. It can also invest a little in other assets and, overall, aims to achieve returns that are equal to, or more than, the rate of inflation +4% per annum (before fees are taken) over rolling 5-year periods. It also targets an income of 4% for investors.
Previously called Ninety One Cautious Managed
Our opinion
Having been managed by industry stalwart Alastair Mundy for a number of years, the fund passed on to John Stopford and Jason Borbora-Sheen in May 2020. Supported by a strong team of specialists at Ninety One, the managers’ tried and tested process has been shown to work well on other funds and, having met with them and carried out due diligence, we are confident they can bring a similar level of success to Ninety One Global Income Opportunities in the future.
Company description
Ninety One is an independent, active global asset manager, managing more than £120.8 billion* on behalf of clients. Established in South Africa in 1991, as Investec Asset Management, the firm started offering domestic investments in an emerging market. In 2020, almost three decades of organic growth later, the firm de-merged from Investec Group and became Ninety One. Today, the firm offers active strategies across equities, fixed income, multi-asset, alternatives and sustainability to institutions, advisors and individual investors around the world.
*as at 30.09.19
Fund manager
Jason Borbora-Sheen and John Stopford have a combined 40 years of industry experience and were appointed co-portfolio managers to this fund in May 2020.
John is a 30-year veteran in the financial services industry and is responsible for all multi-strategy income offerings at Ninety One. During his time at the firm John has held senior positions such as co-head of fixed income and currency, having previously been responsible for the management of the firm’s South African fixed income assets from 1998 to 2004.
Jason is a portfolio manager within the multi-asset team at Ninety One. Jason joined the firm to work on the income strategy as an analyst, with responsibility for its equity exposure. Prior to this he worked for Pan Asset Capital Management as an assistant fund manager on multi-asset portfolios.
They are supported by the multi-asset team in London, which is comprised of 21 cross-asset specialists, as well as other research teams across the business.
Markets offer so many investment choices – from these you can find the income you need to drive returns and the flexibility to adapt to a changing world.
Jason Borbora-Sheen Fund manager
Investment process
The fund has a three-stage process. The first of these is idea generation, which sees specialist research groups identify ideas in their areas offering a combination of income; cash-flow resilience and balance sheet quality; valuation; and capital growth potential.
The team then focuses on building a well-diversified and actively managed fund. This is achieved through an Asset Allocation Forum, which seeks to identify an optimal blend of growth, diversified and uncorrelated assets.
The third stage looks to compound returns by managing risk – this is done with the help of the Strategy Group, which balances income, capital growth and risk objectives, and overlays tactical risk management.
When selecting equities, the team initially filters by size, turnover and volatility. It then ranks each qualifying company by yield, sustainability and other compelling forces. An analyst within the team then tests the investment case for potential stocks.
The team also filters the global high yield universe of some 3,700 names, cutting the number of those eligible to 830 on size alone. These are then screened for value by sector and region. The remaining 240 are then subject to further analysis and stress testing.
The resulting portfolio will typically comprise of 80 equity holdings and 80-100 fixed income issuers.
The change in management has resulted in the fund’s yield target increasing from approximately 2% to 4%, which the managers will seek to obtain through a more diversified equity portfolio of higher-yielding stocks, alongside a greater focus on investment-grade credit within its fixed income allocation.
ESG
ESG - Limited
This fund considers ESG factors throughout the process. The multi-asset approach means each asset class has a different set of factors to consider, which the managers conduct as part of the bottom-up analysis in the process. The team uses a materiality risk assessment model to help identify and evaluate these issues. This has three steps: to identify what ESG factors could impact the investment; over what time period these are likely to occur; and to assess whether these risks are factored into valuations. This allows for a consistent approach across different holdings in the portfolio and avoids the risks of these issues not being factored into valuations. However, this stops short of having formal rules of what can and can’t be in the portfolio meaning that ESG laggards are tolerated, if the team feels they are being adequately rewarded for taking them. As such, the fund will often hold firms considered ESG laggards, with the expectation of improvement and/or financial gain. Ninety One will also use its ownership to influence and improve behaviour through proxy voting and engagement with management teams of firms.
Risk
The team takes a proprietary approach to risk management through categorising assets as growth, defensive or uncorrelated. It can and will use hedging to reduce exposure when risks increase in markets.
Read more about this fund
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