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Banks underweight and emerging market focus boosts Geffen
‘The middle class in the emerging world is currently over 800 million people – greater than the UK, US Europe and Japan put together,' notes Robin Geffen of Neptune Income.
A longstanding underweight to financial shares and a focus on companies with a global reach has helped Robin Geffen’s Neptune Income fund, a pick of Citywire Selection, to outperform in the year to date.
The banking underweight initially hurt performance in the liquidity-driven rally of the first quarter, but it has subsequently helped the fund as volatility and eurozone fears returned to the market.
Since the start of the year to 24 July, the fund has returned 7.1% compared with 2.9% by the FTSE 350 HY benchmark, with many of the fund’s globally focused firms proving quite resilient to the volatility.
Faith in a recovery
Geffen continues to believe in a steady global recovery fuelled by continuing recovery in the US and strong growth in consumer demand from emerging markets.
Geffen’s approach is to find very strong, quality companies with a global footprint that are well financed and cash-generative, and which he believes can sustain and deliver a growing dividend for investors.
The £1 billion fund is an equally weighted 33-stock portfolio divided into three segments.
The three segments
The first third of 11 stocks are ‘steady eddies’: companies which display strong market positions, growth and brands. These stocks tend to be very low turnover, and many have been in the fund since Geffen launched the fund a decade ago.
The second part is what Geffen terms ‘hidden fruit’ where the sector or company has gone through a period where the market has underestimated its prospects, and which Geffen believes offers an opportunity for a turnaround.
The remaining third is called the 'sector segment', where Geffen adds 11 often international stocks to give him the level of exposure to a sector he requires.
Diageo and Pearson: key performers
Drinks giant Diageo (DGE.L) is a key performer this year, with Geffen noting that Scottish whisky exports have grown by around 60% over the past decade, with most of this going to China.
Geffen said in a recent webcast to investors: ‘The middle class in the emerging world is currently over 800 million people – greater than the UK, US Europe and Japan put together.
‘Companies like Diageo have a very strong global footprint of alcoholic beverages [and are] benefiting from very strong growth rates in countries like China for their leading brands like Johnnie Walker Whisky.’
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