David Dudding, manager of the Threadneedle Global Focus Fund, discusses the advantages of going global, the industries that have thrived despite the global pandemic, and the dominant themes in the fund
As a bottom-up stock picker, David Dudding, manager of the Threadneedle Global Focus Fund, pays little attention to the macro events and themes in global markets. His fund is all about identifying strong franchises that boast a competitive advantage within their industry. Yet over the past 18 months, the macro backdrop has had an impact on even the most bottom-up of strategies, as the coronavirus pandemic ravaged whole industries and left the global economy on its knees.
The Threadneedle Global Focus Fund, however, managed to weather much of this storm as a result of its natural bias towards businesses that have thrived in the context of the pandemic. Though Dudding is quick to emphasise that the vehicle is by no means a thematic investment, themes have materialised from the stock picking efforts of the team.
Many of these, including e-commerce, digital payments and cloud computing, for example, emerged as winners during the pandemic. Similarly, the fund has a natural bias towards less commoditised industries and currently* holds no car makers, no airlines and no oil & gas companies, which puts it on the front foot when it comes to Environmental, Social and Governance (ESG) concerns - an issue of increasing importance to the fund's investors.
Dudding says the team strives to invest in companies that are deemed to be among the better performers on ESG metrics, or on their way to becoming such.
"It fits very nicely with our philosophy, because in some ways everything we are looking at is about sustainability of returns," he says. "You can't get this if you are cutting corners from a governance and especially from an environmental point of view, because these are business risks that will return to get you into trouble."
In many ways, the Threadneedle Global Focus Fund is a quality fund. Around 70%-80% of the vehicle is invested in companies that the team believe exhibit high returns, low levels of gearing and debt, and earnings stability, even during recessions. However, Dudding and his team have something up their sleeve that traditional quality funds lack. The remaining portion of the fund can be invested in companies that are improving and on their way to becoming quality companies.
*As of September 2021
Click here to learn how the team analyses the sources of competitive advantage.
This article was funded by Columbia Threadneedle Investments.
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