Shift to ‘multibaggers’ gives Anchor fund the edge
ANCHOR GLOBAL EQUITY FUND
- Raging Bull Award for the Best (FSCA-approved) Offshore Global Equity Fund (for straight performance over three years to December 31, 2020)
The Anchor Group is a South African asset management company that offers a select range of unit trusts to investors, including an offshore range domiciled in Ireland and denominated in US dollars. Its offshore Global Equity Fund was launched in 2015 and uses the MSCI All Country World Total Return Index as its benchmark.
The fund, which is aimed at the investor who can withstand the short-term volatility associated with a global equity fund in order to reap superior rewards over the long term, delivered 90.9% (in US dollars) in 2020, and averaged 29% a year over the past three years.
Its top holdings at the end of 2020 were Sea, a South East Asian gaming and ecommerce company; Tesla; Roku, a developer of devices and software for smart TVs; Snap, the company behind the eponymous social media app Snapchat; and Etsy, an American e-commerce website focused on craft and handmade items.
Its fund manager, Nick Dennis, is refreshingly upbeat about global opportunities for savvy investors. Personal Finance put the following questions to Dennis:
Please outline your investment philosophy/strategy regarding the Anchor Global Equity Fund.
I want to invest in “multibaggers”. These are companies (and shares) with the potential to increase by multiples of their current size over the next five to 10 years. These are typically young, innovative, founder-run companies that are solving important problems in enormous markets.
Finding them isn’t easy – there isn’t a multibagger screen in Bloomberg and spreadsheet analysis will only take you so far. Having an open mind, embracing creativity and being comfortable with the unorthodox are all necessary inputs.
To what do you attribute your fund’s outperformance over the past few years, and specifically during the pandemic?
Over time, I’ve increased the fund’s allocation to potential multibaggers and away from traditional GARP (growth at a reasonable price) names. Covid-19 was an important catalyst in accelerating that change; in some sense, the pandemic opened my eyes to existing trends that I had under-estimated and not fully embraced until 2020.
A multibagger is built on the foundation of a great product – one that’s typically cheaper, more convenient and offers customers greater choice and flexibility. From e-commerce to streaming to the cloud,
Covid-19 exposed more people to superior products. The fund’s holdings benefited significantly from that shift.
Were there any particular standouts in the portfolio?
Two examples are Sea Limited and Etsy, which rose 395% and 302%, respectively, in 2020.
Sea Limited is a gaming and e-commerce company that operates predominantly in South East Asia. Sea has reinvested the cash flows from its hit mobile game Free Fire into its rapidly growing e-commerce division. Sea has every chance of becoming the Amazon/Tencent of South East Asia.
Etsy is a US-based online marketplace for craft goods. Etsy is the anti-Amazon: boutique, intimate and friendly, as opposed to monolithic and commoditised. The pandemic helped Etsy to win over millions of new customers.
How are you positioning the fund for the year ahead, considering the ongoing effects of the pandemic and other local and global opportunities and risks?
The Cambrian Explosion was a period over 500 million years ago in which an abundance of new life forms emerged. I believe we’re in the early stages of a Second Cambrian explosion – of ideas, innovation, new business models and multibaggers – driven by the democratisation of technological tools that were previously limited to the largest corporates on Earth. Today, it’s possible to create a business and reach a level of scale that was previously unthinkable and at a speed that is barely conceivable. Covid was not the genesis of this emerging phenomenon, but it has been a critical accelerant.
Given a rapidly expanding opportunity set, I think we’re in the early stages of a golden age for stock-pickers. The fund remains invested in a number of companies that make these tools available, ranging from e-commerce to software.
The current market environment is unsettling for many (if not most) investors. The pace of disruption is rendering “cheap” stocks expensive and vice versa. Changes in market structure, from the rise of passive to the rebirth of the retail investor class, are increasing the influence of value-agnostic buyers.
It’s an environment in which one has to stay humble, but open to boundless possibilities. It is hard to be anything but wildly bullish long term.