Wealth Manager - the site for professional investment managers

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Somel: I am not turning Global Basics into a generic equity fund

1 Comment
Somel: I am not turning Global Basics into a generic equity fund

Randeep Somel, manager of the £3.2 billion M&G Global Basics fund, has rejected suggestions that he is dragging the fund away from its original investment approach.

Somel (pictured) inherited the fund from Graham French, who told investors ‘I’m not very good at looking at technology’ before announcing his retirement in November last year, and bought a stake in Microsoft.

‘Is this becoming a general global equity portfolio? Answer: no,’ Somel said. He noted that three quarters of the fund was still held in the strategy’s traditional three sectors: consumer staples, basic materials, and industrials.

‘Those are the core sectors: hard assets, high return stocks that we continue to focus on. There are sectors like telecommunications that we have not added to and will not add to, or financials which I have not added to and will not add to. This remains a concentrated, high conviction portfolio and that is how it will remain going forward.’

Somel insisted, then, that buying Microsoft was not a precursor to changing the fund’s style.

‘This question has basically come about since I put Microsoft in the portfolio in November. It is a new stock for this portfolio and it is a new sector – a sector that we have never invested in before. Microsoft, I would say, is the exception rather than the rule for this portfolio.’

So why did Somel invest in Microsoft? ‘It is an excellent company and it is well managed. Now, we have never invested in technology before because technology predominantly over the longer term becomes a commoditised sector. That is not the case with Microsoft. They are not a technology manufacturer; they are an owner of assets.’

Somel observed that Microsoft software is used by 90% of businesses globally, and that there are more computers in China today using Microsoft products than there are in the US.

‘But Microsoft has not been able to benefit from that growth due to piracy,’ he recognised. Somel contended, though, that the situation was ameliorating now that Microsoft was focusing on subscription models rather than charging a large sum upfront.

Furthermore, Somel viewed the changing of the company’s management – with Satya Nadella and John Thompson coming in as chief executive and chairman respectively, replacing Steve Ballmer and Bill Gates – as a positive. ‘This company is now focusing on shareholder returns,’ he claimed, rather than simply growth at any price.

‘If I could find another 10 Microsofts that fit this portfolio, I would buy them all. But at the moment that is the only technology company in the portfolio and I really do believe in its growth potential going forwards.’

The performance of Global Basics has also perked up lately, returning 2.7% over the three months to the end of April compared with an average of 2.3% from its IMA Global Equity sector. It still languishes on a three-year view, however, having lost 8.9% while the peer group gained 20.8%.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Citywire Scotland: how wealth managers use new tech

Citywire Scotland: how wealth managers use new tech

We caught up with a few wealth managers at our annual event in Gleneagles to find out what technological innovations they are employing across their businesses.

1 Comment Play CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

CEO Tapes: Buxton to Gilbert - ‘my Glencore quandary’

Do not miss the first two minutes of this film as Richard Buxton shares how he has been challenged by a client for owning shares in a certain company.

Play CEO Tapes: the huge opportunities for asset managers

CEO Tapes: the huge opportunities for asset managers

From tech disruption, retirement and poaching, the CEO discuss the opportunities for their businesses in this episode.

Read More
Wealth Manager on Twitter