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
