A global fund worth considering

By Morningstar Analysts |  15-10-20 | 
 

In Why I sold a great investment, Morningstar India’s editor Larissa Fernand wrote about her investment in PGIM India Global Equity Opportunities Fund, and its stupendous return.

PGIM India Global Equity Opportunities Fund feeds into PGIM Jennison Global Equity Opportunities fund USD accumulation. The latter is available on the UCIT platform and domiciled in Ireland.

The UCIT replicates the portfolio of the PGIM Jennison Global Opportunities Fund, which is a fund domiciled in USA. For operational convenience, PGIM India invests in the UCIT.

Robby Greengold, Morningstar’s Senior Analyst, analysed this fund last year. According to his analysis, PGIM Jennison Global Opportunities' cheapest share classes was assigned a Morningstar Analyst Rating of Silver. Ratings on pricier share classes range from Bronze to Neutral.

Here is a look at his analysis.

Fund Managers

The strategy receives an Above Average People rating because Jennison Associates' team of growth investors is better than most. Its managers are seasoned and their skill is reflected in this fund's track record and those of other charges.

Veteran comanagers Mark Baribeau and Tom Davis have a long shared history. They joined subadvisor Jennison Associates in 2011 to lead and advance the firm's research of foreign stocks, which had not been a focus of the traditionally U.S.-oriented shop. Previously, both had established themselves as money managers at Loomis Sayles, where their contributions were often central to the success of several domestic and global portfolios.

For instance, Baribeau skilfully steered large-growth fund Loomis Sayles Growth from 1999-2010. The fund outpaced the Russell 1000 Growth Index in two thirds of the monthly rolling three-year periods.

He and Davis comanaged separate account Loomis Sayles Global Equity Opportunities from 2004-11, which posted gross annualized returns far better than the MSCI ACWI's on their watch.

They are backed by 11 sector specialists and 3 analysts providing regional expertise.

The Strategy

This strategy is similar to, but more potent than, those Loomis Sayles charges. Whereas at Loomis Sayles, Baribeau built 50- to 60-stock portfolios of competitively advantage fast growers, here he and Davis have cut the number of holdings to 35 to 45. The fund is also unconstrained in its regional exposures and sector allocations, though it sticks to publicly traded companies in looking for the world's most attractive growth stories.

Few shops are better suited to run such a strategy. For more than 15 years, virtually the same stable team of growth investors has scoured the globe for companies whose competitive brawn can sustain rapid growth over multiyear horizons. Consistently good stock-picking at the firm's flagship strategy-- PGIM Jennison Growth --proves the team's talent.

The Risk

Talent can't eliminate risk, though. The team routinely embraces the high price multiples commanded by rapidly growing companies, which leads to disappointment if earnings-growth expectations don't materialize. That pricey fare has contributed to the fund’s above-average volatility and increases the chance of hitting rough patches. Investors must be prepared for both.

Fast growers with economic moats typically don't sell cheap, and the managers have consistently paid a premium for them. In October 2019, the portfolio's average price/forward-earnings ratio of 40.5 put it at a premium of over 250% to the MSCI All-Country World Index's. That carries risks of disappointment if those earnings-growth expectations don't materialize.

The Portfolio (August 31, 2020)

  • Equity holdings: 39
  • US Equities (55.8%), non-US Equities (43.1%), cash (1.1%)
  • Developed Market (85.3%), Emerging Market (14.7%)
  • Top 5 countries: US, France, China, Brazil, The Netherlands
Add a Comment
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Suleiman Haq
Oct 26 2020 12:43 AM
 Dear Larissa,

The source of the information on the fund is from morning star only:

https://www.morningstar.in/mutualfunds/f00000h3k4/pgim-india-global-equity-opportunities-fund-growth/performance.aspx

If you look at the performance of the fund every year from 2016, only in YTD it beats Franklin India Feeder US fund or any other US fund. While in other years it has been beaten comprehensively by the US funds.
Larissa Fernand
Oct 26 2020 12:00 AM
 To answer the other 2 comments of Kshitij and Suleiman:

The fund analysed above is PGIM Jennison Global Opportunities. Here are its performance numbers.
It performed badly in 2016 with -4.76% (as against the category return of 5.54%).
In 2017, it delivered 42.97% (23.61%).
In 2018, it fell by 2.84% (-9.64%).
In 2019, it delivered 30.35% (25.68%).

PGIM India AMC states:

The PGIM Jennison Global Equity Opportunities Fund has been the underlying fund for PGIM India Global Equity Opportunities (India fund) only since late 2018.

PGIM India Global Equity Opportunities fund feeds into the underlying fund PGIM Jennison Global Equity Opportunities Fund USD Accumulation, which is available on the UCIT platform and domiciled in Ireland. The UCIT replicates the portfolio of the PGIM Jennison Global Opportunities Fund, which is a fund domiciled in USA. For operational convenience, we invest in the UCIT.

However, the UCIT performance history is only available since 2017.
Kshitij Pandey
Oct 23 2020 01:01 AM
 The fund is what i would like to term as "Consistently Inconsistent"-Look at its annual returns(in %) for last 5 years(direct growth plan): 1.55(2014) -14.06(2015) 1.49(2016) 13.54(2017) 1.77(2018) 31.88(2019). I guess the editor was indeed "very lucky(and also very prudent) in encashing at the right time. In fact this is the perfect dilemma for investing in available choice of international MF currently available in India-the peaks and valleys(in terms of performance) does not really help build a case for diversification-A comment/thought on this would be appreciated!
Suleiman Haq
Oct 22 2020 04:22 PM
 The fund has performed well only in the last one year, hence not sure how we are recommending it is a unique and good fund.
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