Global equity manager heads to Europe for EM exposure

Many a manager can be heard extolling the virtues of a disciplined approach but for Neuberger Berman's Benjamin Segal it's inescapable since the practice is written into the name of the fund he runs. Here, the Citywire A rated manager gives an insight into how his portfolio is shaping up as we enter the last quarter of the year.

With colleagues Daniel Rosenblatt, John Barker and Larry Fisher, Segal (pictured above) runs the Neuberger Berman Global Disciplined Growth Fund, a global equity fund that has a strict criteria for stock selection.

Launched in 2007 the fund seeks out companies that fit Segal's mantra of 'GARP rather than GoGo extreme growth' and he believes this restraint plays a vital part in the disciplined approach the team take to running the fund.

'Growing businesses that are profitable: that’s our definition of quality,' said Segal.

‘We’re not interested in companies that are shrinking to grow such as by overwhelmingly cutting costs. We prefer organic growth with incremental bolt-on acquisitions but only if there is a good track record for implementation.’

Taking a bottom-up approach the fund has a preference for mid to large cap stocks and with nearly 150 holdings as at the end of July it is a well diversified portfolio.

On the future for the US Segal said: ‘We’re entirely neutral on US versus non-US decision', as he believes there are big macro issues that could drive the dollar lower but equally, low interest rates, deregulation and the risk aversion trade all present brighter prospects for the currency.

Standing at nearly 7% as at the end of July, the fund's exposure to pure emerging markets is relatively small as Segal believes the region is becoming expensive.

He said: ‘The growth in emerging markets is likely to outpace that of the developed markets. We feel increasingly comfortable with these companies but the issue today though is that there is a fair amount of hype. Valuations are beginning to reach levels that we’re uncomfortable with.’

He cites a stock the fund recently sold as an example of the growing cost of being involved in emerging markets.

‘One company we have owned is called Hengan – they make diapers, a kind of Kimberley-Clark of China. They have a strong brand with 20% margins that are the envy of anyone else in the world but it is an incredibly expensive stock now with valuations at north of 30 times earnings.’

However to combat this, the fund instead invests in the region via European companies, he explained: