In any given month, Wattle Partners meets with many different professionals offering a new investment product, idea or scheme. Most are a pass from us, but now and again some pique our interest.
It was the day before Christmas and we had arranged to meet with a relatively unknown group to us, called GQG Partners. After hesitantly accepting the meeting we were happily surprised by the quality of the manager and wondered how it had passed us by thus far.
GQG stands for Global Quality Growth and that is exactly what they appear to have been delivering. The group was founded by Rajiv Jain, who has 26 years’ experience in funds management, having run the emerging markets and global equity strategies at the renowned Vontobel Asset Management. As is the case with most of the world’s top equity managers, Rajiv started the company because he wanted to be able to invest his own capital in the strategy but also have ownership of the business itself, both gains and losses.
GQG has been operating since 2016 but already has over $42bn under manageemnt across global equities ($18bn), emerging market equity ($12bn) and international, specific equity strategies ($12bn). As is generally the case, the fund is well backed by institutional and pension fund investors, including a number of Australian super funds, but has had little penetration into the direct investor and adviser market. The domestic managed funds on offer have $158m (global equity) and $100m (emerging markets) respectively under management. This is despite delivering benchmark leading returns of 20% (compared to 16%) and 28% (versus 15%) for both strategies over the last 12 months.
The firm has a number of unique traits that appear to have driven the outperformance, which begin with their approach to identifying ‘forward looking quality’. This is opposed to the traditional approach of using backward looking financial results to determine forward looking value, rather they put in place conservative assumptions of business performance to understand risks and cyclicaly in the next five to ten years.
The other key differentiating point is the Rajiv’s inclusion of a number of Investigative Journalists on his investment review team. It is the role of these people to question every aspect of a thesis on a company being prepared for addition to the portfolio, asking questions of suppliers, customers and travelling heavily to understand supply chains.
The portfolios are low turnover, diversifed across 40 to 60 holdings and span both value and growth investments, ensuring there is little commonality with the benchmark.
As advisers, one of the most difficult investment opportunities to find are high quality exposures to emerging markets, GQG seems to have an extremely competitive offering and we will provide more information in future issues.