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07 Jul 2014

FGEF Feeder Launched

The Singapore-domiciled Foord Global Equity Fund (FGEF) was recently approved by the Financial Services Board for distribution in South Africa. The FSB concurrently approved a South African into FGEF, which is now available for investment.

Foord owns a 17-year track record of successful investing in global markets and three-decades of top ranking investment returns in South Africa. This proven Foord experience underpins Foord Singapore’s ability to construct, in the Foord Global Equity Fund, a diversified, high-conviction, low risk portfolio of quality shares. We expect the fund to outperform the MSCI All Country World index over time, with lower risk.

The fund’s objective is different to that of the Foord International Fund, which has a conservative, absolute-return mandate. Investors assessing the two portfolios should be aware that FGEF’s return profile will likely exhibit significantly more volatility over shorter periods. We both expect and welcome this volatility as an opportunity to invest in great companies at excellent prices. The fact that we do not view volatility as a risk has set us apart from the competition for three decades.

Foord’s investment process can best be described as forward-looking and dynamic. The Singapore team employs both “top-down” and “bottom-up” metrics to construct the portfolio through a value-driven, common-sense investing approach. The top-down aspect involves analysing a range of economic variables, geopolitical factors, macro themes, market valuation and sentiment. From a bottom-up perspective, our analysts conduct rigorous fundamental research to ensure that the companies we buy will weather economic cycles and deliver superior earnings growth over the long term.

The Fund is managed by Dave Foord and Foord Singapore Chief Investment Officer, Vincent E. The multiple counsellor approach mitigates key man risk while allowing each individual portfolio manager to build concentrated portfolios of their best ideas. In common with Foord’s experience in South Africa, having a small but experienced team of managers and analysts dispenses with the need for cumbersome committees, and thus portfolio decisions are implemented swiftly.

As its name suggests, FGEF is a global fund. The investment team can thus research all geographies for companies that offer prospects for sustainable earnings growth and portfolio diversification. It is common cause that diversification can reduce risk. The Foord approach has always emphasised the importance of balance in the portfolio, while never “betting the farm” on a particular company, sector or theme. It also stresses the need to actively manage the risk that we are wrong in our headline views.

Over the past few years, global equity markets have surged in anticipation of improved economic growth and corporate earnings. FGEF has underperformed its benchmark during this bull phase, with the “rising tide” having lifted even lower quality stocks. This does not alarm us as our experience over three decades shows that our equity portfolios tend to underperform in strong bull markets.

I have mentioned that the investment process is forward looking. Therefore, the portfolio includes both large and medium capitalisation companies that we expect will re-rate significantly over the medium term. Warren Buffet said that “the stock market serves as a relocation centre at which money is moved from the active to the patient.” Stock selection is paramount. With much of the market now focused on the very short term, we believe that investors focusing on earnings growth three- to five-years out will ultimately be rewarded most handsomely.

Given its very different investment objective, the FGEF portfolio exhibits significantly disparate holdings to its Foord International sister fund. For example, only one of the respective top-five shareholdings is common. We are confident that FGEF comprises the optimum balance to ensure that the Fund is poised for superior returns in the coming years.

Note: For investors that wish to invest directly and not through a feeder fund, FGEF is available for direct investment by South African investors with lump sums of $10,000 or more. See www.foord.com.sg

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