Goldman Sachs Asset Management is one of the two sub-managers with Threadneedle Asset Management Limited. Let’s discover their approach in the management of the FÉRIQUE International Equity Fund.
Can you explain your investment approach in a few words? What makes it stand out?
Our investment philosophy focuses on investing in international developed market equities (outside of North America) that offer attractive dividend yields. We seek to build a concentrated portfolio of high-quality companies with sustainable and growing yields, using a disciplined, quality value-oriented approach. Our strategy is designed to seek to achieve three goals1: delivering higher income, providing resilience during market downturns, and generating consistent total returns over the long-term, including growth in dividends.
Why do you favor companies that pay dividends? How can this be advantageous for investors?
We believe a company’s dividend policy provides valuable information on capital allocation discipline and the quality of the management team. A sustained dividend may signal towards shareholder friendly capital allocation and a strong underlying business. Dividends are particularly important in International Markets as they drive a greater portion of returns: Over the last 10 years, the dividends received and reinvested has accounted for ~60% of total returns for the MSCI EAFE Index versus just ~20% for the S&P 5002. Dividends can also serve as a buffer against market drawdowns that can be sharper in international markets.
Can you share an example of a company you recently invested in?
We recently initiated a position in LVMH Moët Hennessy Louis Vuitton SE3. LVMH is a French global luxury conglomerate with access to various markets through its diverse portfolio of brands and products including Dior, Tiffany & Co., and Dom Perignon. LVMH remains a resilient and well positioned name within the Luxury consumer space. LVMH's market capitalization is almost double that of its next largest competitor and offers leadership in a luxury market that is trading at a deep discount which fueled our decision to initiate a position in the name.
How do you adjust your strategy when facing global changes, like the U.S. elections or geopolitical tensions?
Given the potential for increased market volatility around global changes, we believe it is critical to be highly selective and focus on companies that are exposed to long term secular growth themes that can do well over the full market cycle independent of market events. When facing global changes, we seek to remain humble, balanced, and nimble in our risk management.
We thoughtfully construct the portfolio from the bottom-up, with the aim to keep the majority of risk from stock selection rather than other non-stock specific factors. Our experienced team employs a long-term, agile approach, both defensive to reduce risk and focused on business quality. The portfolio is therefore defensively positioned and designed to maintain low volatility (low “beta”), which may enable it to better withstand market downturns and periods of high volatility4.
How is your portfolio currently positioned, and what drives your current decisions?
We continue to pursue a high-conviction, i.e. with few stocks in the portfolio, and long-term philosophy in our strategy, highlighting access to global industry leaders with exposure to secular themes. We are seeing opportunity in themes such as AI and digitization, health care reshoring, climate transition and luxury. We are also slightly overweight Financials as European banks have done well in a higher rate environment and have solid balance sheets with strong capital generation and discipline.
We continue to construct the portfolio from the bottom-up, focusing on stock selection rather than top-down views. As investors revert their focus to companies with earnings resilience along with the pricing power and competitive positioning to defend margins, high operational and financial strength is expected to become increasingly relevant. In our opinion, quality stocks, have had a reliable history of outperforming across market cycles, albeit with short, punctuated periods of relative weakness. As active investors, we have continued to build meaningful positions in high quality resilient businesses and complement them with select cyclical exposure to companies that are likely to extend their leadership. We are aware of the fact that the companies we own will have to face challenging economic times at some point, predictable or not. We select them because of our confidence in their ability to grow, and to prosper relative to their competitors, over the economic cycle.
About Goldman Sachs Asset Management
Goldman Sachs Asset Management is one of the world’s leading investment managers with over $2.6 trillion in Assets Under Supervision5. Bringing together traditional and alternative investments, Goldman Sachs Asset Management provides clients around the world with a dedicated partnership and focus on long-term performance. Our investment solutions include fixed income, money markets, public equity, commodities, hedge funds, private equity and real estate. Our clients access these solutions through our proprietary strategies, strategic partnerships and our open architecture programs.
About the FÉRIQUE International Equity Fund
The FÉRIQUE International Equity Fund aims to maximize long-term returns through capital appreciation. The Fund invests primarily in all classes and categories of common shares of companies located primarily in developed markets outside of Canada and the United States. Threadneedle Asset Management Limited manages the Funds along with Goldman Sachs Asset Management L.P.
