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February 2016
Important Information:
This webinar contains information specifically intended for institutional clients, asset consultants, advisers, platforms and researchers, who are professional investors and wholesale clients (as defined in the Corporations Act 2001).
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The $650 million fund headed by chief investment officer Ned Bell, son of stockbroking doyen Colin Bell, made 10.8 per cent in Australian dollar terms, before fees, in the past year.
That beat the benchmark MSCI World ex-Australia index by 6 per cent.
To be sure, the past nine months have been a tough period for long-only funds as global stockmarkets have fallen about 20 per cent on the back of headwinds ranging from China’s economic slowdown, commodity oversupply and the start of US interest rate hikes.
But by sticking to quality global companies at a reasonable price — wherever they are domiciled — Bell Asset Management has returned an impressive 8.4 per cent since inception in 2003.
“We feel like we’ve done quite well,” Mr Bell tells The Weekend Australian.
He attributes the continued outperformance of the fund not only to its exposure to some of the world’s best-known brands — like Apple, Nike and Costco — but also the “non-exposure” to emerging markets and the energy and financial sectors.
“Having no exposure to energy and very little exposure to financials really hurt us in the preceding two years,” Mr Bell says.
“One of the biggest consensus trades was long US and European banks, but that’s obviously done a complete U-turn and you’ve seen a sharp de-rating of US banks, and credit quality concerns around European banks.”
BAM also benefited from a lack of Japanese equities which slumped into a bear market last month.
However, Mr Bell and his team are heading to Tokyo this weekend to look for bargains in Japan.
“Japanese equities have been beaten up pretty heavily and there is a bit of value,” he says. “Softbank, we used to own, and they made a fairly disastrous investment in Sprint, but the fact they are starting to buy back their own shares to a big degree, it is demonstrating some degree of value.”
Six months ago, Mr Bell’s main concern in the market was around valuations in global equities that were “quite toppy”, with the price-earnings ratio of the MSCI World index hitting 17 times.
Going into the second half of last year, BAM trimmed its equities exposure where valuations were stretched, while also taking the opportunity to lower the “cyclicality” of the portfolio.
Mr Bell is now looking to buy some more of his higher conviction stocks and initiate some new positions. His team is researching a dozen more US companies for potential inclusion in the portfolio.
But he still can’t get excited about emerging markets despite a massive fall in share prices.
“Last July, we had no direct exposure to emerging markets equities because the corporate quality wasn’t particularly good in general and we had no confidence in the earnings outlook.
“Fast forward to January and emerging markets have fallen 15 per cent in Aussie dollar terms and they have underperformed the MSCI World index by 6.5 per cent. Everyone is now asking whether emerging markets are cheap because they have fallen so far.
“But the actual earnings per share estimates have fallen by 14 per cent, so while share prices have fallen emerging markets equities are not cheaper on a price-to-earnings basis.”
The $650 million fund headed by chief investment officer Ned Bell, son of stockbroking doyen Colin Bell, made 10.8 per cent in Australian dollar terms, before fees, in the past year.
That beat the benchmark MSCI World ex-Australia index by 6 per cent.
To be sure, the past nine months have been a tough period for long-only funds as global stockmarkets have fallen about 20 per cent on the back of headwinds ranging from China’s economic slowdown, commodity oversupply and the start of US interest rate hikes.
But by sticking to quality global companies at a reasonable price — wherever they are domiciled — Bell Asset Management has returned an impressive 8.4 per cent since inception in 2003.
“We feel like we’ve done quite well,” Mr Bell tells The Weekend Australian.
He attributes the continued outperformance of the fund not only to its exposure to some of the world’s best-known brands — like Apple, Nike and Costco — but also the “non-exposure” to emerging markets and the energy and financial sectors.
“Having no exposure to energy and very little exposure to financials really hurt us in the preceding two years,” Mr Bell says.
“One of the biggest consensus trades was long US and European banks, but that’s obviously done a complete U-turn and you’ve seen a sharp de-rating of US banks, and credit quality concerns around European banks.”
BAM also benefited from a lack of Japanese equities which slumped into a bear market last month.
However, Mr Bell and his team are heading to Tokyo this weekend to look for bargains in Japan.
“Japanese equities have been beaten up pretty heavily and there is a bit of value,” he says. “Softbank, we used to own, and they made a fairly disastrous investment in Sprint, but the fact they are starting to buy back their own shares to a big degree, it is demonstrating some degree of value.”
Six months ago, Mr Bell’s main concern in the market was around valuations in global equities that were “quite toppy”, with the price-earnings ratio of the MSCI World index hitting 17 times.
Going into the second half of last year, BAM trimmed its equities exposure where valuations were stretched, while also taking the opportunity to lower the “cyclicality” of the portfolio.
Mr Bell is now looking to buy some more of his higher conviction stocks and initiate some new positions. His team is researching a dozen more US companies for potential inclusion in the portfolio.
But he still can’t get excited about emerging markets despite a massive fall in share prices.
“Last July, we had no direct exposure to emerging markets equities because the corporate quality wasn’t particularly good in general and we had no confidence in the earnings outlook.
“Fast forward to January and emerging markets have fallen 15 per cent in Aussie dollar terms and they have underperformed the MSCI World index by 6.5 per cent. Everyone is now asking whether emerging markets are cheap because they have fallen so far.
“But the actual earnings per share estimates have fallen by 14 per cent, so while share prices have fallen emerging markets equities are not cheaper on a price-to-earnings basis.”
