Artemis’ new global equities team has reported today that it has overhauled the investment themes that drive asset allocation decisions on the Artemis Global Select Fund.
In their latest update issued today, the team highlights how the fund is built around eight long-term investment themes that are subject to periodic review. This is the first review since the £268m fund was taken over by Alex Stanić (pictured thanks to onEdition), Swetha Ramachandran and Natasha Ebtehadj on the retirement of Simon Edelsten at the beginning of October last year.
The new themes are Financial inclusion & digital finance (currently 16.7% of the portfolio), Leading consumer brands (15.2%), Scale matters (14.4%), Semiconductor ubiquity (13.6%), Special situations (9.5%), More efficient world (9.2%) and Software Ubiquity (8%). An earlier theme – Healthcare costs – has been amended to Healthcare costs and innovation. It makes up 12.3% of the fund*.
Alex Stanić, Head of Global Equities at Artemis and lead manager of the fund, said: “The themes have evolved but they are still diversified and each benefits from a long-term tailwind that should endure regardless of the economic cycle. Within these themes we pick undervalued, quality companies capable of exploiting those tailwinds and delivering strong growth.
“Many people recognise the benefit of thematic investing, but the problem is that the weather changes. This is why single-theme funds top the tables one year and then often dive a couple of years later. The beauty of a model like ours is that we can build a global portfolio around a diverse range of themes and change or modify them nimbly as circumstances change. This combination of diversity and flexibility builds resilience and can help us to deliver more consistent performance.”
The new themes for this Artemis fund are:
- Financial inclusion and digital finance
Alex says: “We have paired these because they are inter-related. We have seen how a country like India can go from a place where only a tiny proportion of the population has a bank account, to one where suddenly it’s the norm, and people are buying food on the streets for a few rupees using their phone and digital banking. Lending becomes easier and cheaper. All this has a massive impact on GDP and wealth creation in a country. The banks are at the heart of that, benefiting customers and shareholders alike.”
Example holding: NU Bank – a digital finance platform, based in Brazil and growing rapidly across Latin America and into Mexico.
- Leading consumer brands
Alex says: “This is a subset of the Artemis Leading Consumer Brands Fund we launched last year. We are looking for really strong global businesses with consumer-orientated brands that have a strong following in developed markets and benefit from the rise of the middle classes in emerging markets.”
Example holding: Campari – the Italian drinks company with great economics and strong management, benefiting from long-term consumer trends in the spirits world.
- Scale matters
Alex says: “These are companies that have a massive network effect advantage, benefitting from the extreme scales achievable in a digital economy that we believe makes them extremely tough to dislodge or even keep up with. These sorts of company can look expensive, but the past year has given us chance to buy some at good prices and helped performance. Some of them will also likely see a benefit from AI given their substantial data assets, which gives them a further potential attraction.”
Example holding: Amazon, which benefits from very substantial scale both in its ecommerce business – where it remains a leader in terms of both choice and convenience – as well as in its cloud service business, AWS. Both of these have a long runway of potential growth ahead of them as well as scale advantage.
Semiconductor ubiquity
Alex says: “Semi-conductors are more vital to the global economy then ever before, and the more powerful they get, the more ways we find to utilise them. As chips get more complex and harder to make the companies that make them become more important, so they are high margin businesses – and deservedly so, given the investment required. Beneath these giant manufacturers lie a host of other businesses providing vital components and expertise to the industry, which creates interesting opportunities for investors with the skills and capacity to research the sector thoroughly.”
Example holding: TSMC, a global leader in chip manufacture, a critical enabler of the semiconductor industry, vital for Apple’s smartphones and Nvidia’s GPUs.
- Healthcare costs and innovation
Alex says: “With an ageing population and increased healthcare coverage globally driving demand, care costs are going to rise. Technology can play a big role in meeting that demand and challenging those costs, whether it is finding more effective treatment, enhancing testing for early diagnosis, or improving the efficiency of the way health provision is delivered.”
Example holding: Novo Nordisk has a been a good performer for the fund. Its weight-loss drug, Wegovy, and diabetes drug, Ozempic, are helping reduce the costs of treating obesity and managing long-term conditions like diabetes.
- More efficient world
Alex says: “There are a host of opportunities that fit in this category, including automation (which has long been a theme of the fund) and reduces labour costs, and technology that can reduce energy costs and the environmental impact of commodities and products. The key for us is to identify those with sustainably superior economics.”
Example holding: Keyence, the Japanese manufacturer of sensors and measuring equipment, which has 80% gross margins and a 10% market share. It is the leading company in its field and a key enabler of more efficient manufacturing via automation.
- Software ubiquity
Alex says: “The percentage of company budgets going on software is rising. The best companies’ products become deeply embedded in the infrastructure and workflows of their customers’ businesses. AI is likely to help increase this, and is helping to enhance the productivity capabilities of software and making the providers even more vital.”
Example holding: Microsoft is a classic example of a company in this space. It benefits in many ways as a powerful incumbent providing cloud services and integrating AI and Gen AI capabilities into its offering.”
- Special situations
Alex says: “Artemis Global Select has always had the flexibility to invest opportunistically in companies that do not necessarily fit comfortably within the core themes. These sorts of companies will fit into our special situations theme. We believe that idiosyncratic opportunities with a tail wind should also be able to compete for capital.”
Example holding: AENA an undervalued owner of European airports benefitting from long-term travel growth.
*Theme percentages correct as at 15 May 2024 and subject to change.
