International equity markets remain volatile, still bowed following nervousness inspired by China’s slowdown and the timing of a US interest rate rise.

The good news is these bouts of indiscriminate selling have thrown up opportunities for stockpicking funds. Investors of a nervous disposition can draw succour from a genuinely global equity fund which diversifies risk and has a strong long-term performance track record.

One such vehicle is the Martin Currie Global Portfolio Trust (MNP), tasked with delivering long-term growth, in excess of the capital return of the FTSE World Index, by investing in a diversified portfolio of internationally-quoted companies. The trust is managed by charismatic Scotsman Tom Walker, a chartered accountant who boasts almost 30 years’ investment experience, having previously run money at Baring Asset Management and Edinburgh Fund Managers.

(Click on chart to enlarge)

Walker’s charge not only benefits from being a genuinely global equity fund - it can select around 60 of the best companies from around the world - which spreads risk, but its prospects are also boosted by a deeply resourced team at Martin Currie, from which the seasoned stockpicker can draw support and inspiration.

With £180.7 million in total net assets at last count, the trust has delivered strong long-term outperformance of its FTSE World Index benchmark. Paying quarterly dividends since May 2013, Martin Currie Global Portfolio Trust has grown the payout by a compound annual growth rate (CAGR) of 7.4% since launch and it has never been cut.

The trust is ungeared and a zero discount policy was introduced in July 2013; this allows any shareholder to sell shares at or very close to net asset value (NAV), ensuring the share price doesn’t languish at an unwarranted discount to the underlying assets.

‘In volatile markets, making short term predictions is a mug’s game,’ says Walker. ‘Martin Currie Global Portfolio Trust invests in a combination of companies that offer long term returns either because they are growing well despite the tough environment or because their valuation suggests most investors are too pessimistic about their long term potential. I am not assuming the world economy is about to take off - I don’t think it will - but I’m focusing on stocks that can outperform in a slow growth, low interest rate environment.’

Focus on fundamentals

Walker’s investment philosophy posits that it is possible to identify undervalued companies with strong or improving fundamentals, led by a valuation that is cheaper than the market, a proven growth track record and superior financial quality. He argues stock-focused portfolios, driven by fundamental research, are the best way to exploit the inefficiencies of Mr. Market and generate consistent outperformance.

(Click on chart to enlarge)

Key characteristics of the fund include its focus on around 60 best ideas, as well as ‘a three-to-five year time horizon that can see through short-term market noise’. Walker explains the fund is concentrated and high conviction and ‘truly active’, anything but a closet tracker. Its active share - a measure of the percentage difference between the portfolio holdings and the index constituents - is very high at 87.1%. ‘The best way to outperform the index is to distance yourself from the index,’ he explains.

Opportunity knocks

Recent sell-offs have thrown up opportunities at stock level, insist Walker, an investor in the likes of tobacco giant Philip Morris International (PM:NYSE) and beer brewer AB InBev (BUD:NYSE), in the midst of a mega-merger with SABMiller (SAB).

Among his more recent purchases is ARM Holdings (ARM), the leading microprocessors designer, bought on weakness inspired by the slowdown in China, a huge end-market for smartphones containing its chips. Walker points out ARM is a high-quality concern with unique intellectual property and the ‘standard’ for scalable, energy efficient processors. The £15 billion cap’s expensive rating, he argues, is justified by its strong earnings, cash flow and return on invested capital.

Walker has also bought UPS (UPS:NYSE), the logistics and parcel delivery company he considered oversold. UPS, a beneficiary of recent investment in automation, is ‘very high quality’ and has ‘very strong cash flows’.

(Click on chart to enlarge)

Another interesting addition to the portfolio is Facebook (FB:NDQ), the Mark Zuckerberg-bossed social networking behemoth. ‘Facebook, which includes Instagram and WhatsApp, is the leading play on growth in mobile display advertising,’ insists Walker. ‘Clearly, the advertising market is undergoing structural change with the growth of social media and Facebook has the data and user base to best allow advertisers to maximise their target audience.

‘The company has a number of initiatives to increase engagement in and monetisation of its established and newer assets. I believe the strong top-line growth will lead to higher margins and positive earnings surprises. As such, it can easily grow into its apparently expensive prospective price-to-earnings ratio of thirty times.’

Upside stateside

A major opportunity for fund managers is the US consumer, though the retail market across the pond is proving tough for Wal-Mart Stores (WMT:NYSE) and others. Two strongly-performing US retailers owned by the trust are L Brands (LB:NYSE), the specialty retailer behind intimate apparel chain Victoria’s Secret, and TJX (TJX:NYSE), the discount clothing, footwear and furniture retailer that trades as T.K. Maxx in Europe.

Both are growing strongly, drawing strength from their sale of differentiated product, keen pricing and strong supply chain management. Demonstrating the degree to which the trust can go global for growth is the presence of another retailer in the book, namely Matahari Department Store (LPPF:JK), ‘a very high growth company and the biggest department store group in Indonesia, where modern retail is still in its infancy’.

Tom Walker

Portfolio Manager

Martin Currie Global Portfolio Trust (MNP)

Share price: 178p (as at 5 Nov)

NAV per share: 179.56p (as at 5 Nov)

Discount: 0.9%

Fund Facts

(as at 30 Sep ‘15)

Type: Investment trust

Launched: 1999

No. of holdings: 60

Active share: 87.1%

Benchmark: FTSE World Index