By Jayson Forrest - Managing Editor - IMAP Perspectives
With a view on focused businesses to drive portfolio diversity and outperformance, Franklin Templeton has taken out the 2021 IMAP Managed Accounts Award for International Equities.
Despite the increasing ease of access to global markets, resulting in a rise in retail and ‘Robinhood’ traders, international equities remains a sector of the market where professional management, deep experience and a global presence, allows managers to add value in portfolio management, thereby delivering significant long-term advantages to investors.
“In recent years, we have clearly seen these large, long-established and well-resourced managers become more prominent within the market, with an increasing number of them now providing a managed accounts solution as part of their service offering,” says IMAP Awards judge and consultant, Dominic McCormick.
And while there were some Australian-based managers in the mix of finalists in this year’s International Equities category of the IMAP Managed Accounts Award, the gong went to Franklin Templeton for the second consecutive year.
Launched in 2015, the Franklin Global Concentrated Equity ex-Australia SMA is a concentrated, high-conviction portfolio of approximately 20 stocks that is benchmark agnostic, and is focused on finding sustainable growth opportunities around the world. The portfolio is managed by the Franklin Global Growth team, comprising John Remmert and Don Huber CFA out of New York, alongside Sydney-based portfolio manager and analyst, Francyne Mu CFA.
The investment objective of the strategy is to outperform the MSCI World ex-Australia Index in Australian dollars (after fees and expenses but before taxes) over the medium to longer term. The portfolio strategy seeks companies whose earnings streams are not highly correlated. By doing so, it has been able to maintain a consistent track record of outperformance.
“As a global manager, international equities is an asset area we thrive in,” says Francyne. “We take a bottom-up approach when selecting quality growth companies that have sustainable business models. Advisers want quality engagement, transparency and in-depth research on high conviction positions, and that’s how we’ve approached our offering at Franklin Templeton.”
Francyne Mu CFA - Franklin Templeton
We take a bottom-up approach when selecting quality growth companies that have sustainable business models. Advisers want quality engagement, transparency and in-depth research on high conviction positions, and that’s how we’ve approached our offering at Franklin Templeton.
A preference for focused businesses
When seeking out investment opportunities, Francyne confirms the investment team has a research-driven approach to stock selection, which is highly concentrated around 19-20 stocks in the SMA portfolio.
“We are always trying to uncover the best ideas in the market, spanning a broad range of sectors, in order to find the right companies, so we can hold them over the long-term. It also allows us to build diversification within the portfolio,” she says. “These companies tend to have a strong competitive advantage. They generate strong, free cashflow, which is supported by secular growth drivers that can create value over the long-term.”
Franklin Templeton’s preference is for focused businesses rather than conglomerates, with exposure to areas with underlying secular growth, such as cybersecurity, e-commerce, supply chain, and robotic surgery. According to Francyne, companies in these areas provide good underlying growth, driven by penetration of new customers through increasing adoption of new technologies and services.
“These focused businesses allow us to diversify and limit the economic overlap across each of those holdings, which allows us to keep the portfolio in good stead over time, while delivering strong outperformance.”
Francyne adds that Franklin Templeton’s investment horizon is typically around 3-5 years. However, she adds: “But once we find a good idea and we’re confident the company will continue to deliver and provide us with growth, we can stick with it for up longer.”
We are always trying to uncover the best ideas in the market, spanning a broad range of sectors, in order to find the right companies, so we can hold them over the long-term. It also allows us to build diversification within the portfolio.
Different parts of the jigsaw
When it comes to appraising the success of the Franklin Global Growth strategy, it’s not just the strategy’s track record of outperformance that is measured. The manager also gauges its success on the strength of the relationships it has with advisers and the support it provides them with.
According to Francyne, this means ensuring that advisers are supported and properly equipped to enable them to have the right type of investment-related conversations with clients.
“So, whether that’s thought-leadership material, access to our global insights, the transparency of the SMA, or the investment returns we provide, there are many operating parts we look at when gauging our success at Franklin Templeton in delivering better outcomes for clients.”
These focused businesses allow us to diversify and limit the economic overlap across each of those holdings, which allows us to keep the portfolio in good stead over time, while delivering strong outperformance
Long-term commitment
Since establishing a presence in Australia in 1987, Franklin Templeton has enjoyed a 34-year relationship with the local market, with offices currently in Sydney and Melbourne, where it offers institutional and retail clients access to specialised expertise across key asset classes, ranging from international equities and fixed income to Australian equities.
It’s this long-term commitment to the Australian market that Francyne is particularly proud of, and while she is buoyed to win this year’s IMAP Award for International Equities, she says the award is credit for the work and dedication by the investment team with the SMA strategy.
“To receive this award and have the Franklin Global Growth portfolio recognised for a second consecutive year is amazing,” she says. “Franklin Templeton has been committed to the Australian market for a long time now, so to win this award again is not only a fantastic achievement and a great honour, but terrific recognition by our peers.”
Finalists
IMAP congratulates all the finalists in the International Equities category for 2021
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- Franklin Templeton Investments
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- Swell Asset Management
- Watershed Funds Management
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- Zurich Investments