Artemis Global Income: April 2020 fund update

Jonathon Curtis | Thu 30 April 2020

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• This fund could be a useful diversifier to more ‘plain vanilla’ global income portfolios
• Jacob de Tusch-Lec is a bold investor and isn’t constrained by where he can invest
• The fund’s delivered decent yields in a sector where they’ve been hard to come by

How it fits in a portfolio

This fund aims to provide a healthy, steadily growing income coupled with some long-term capital growth, although there are no guarantees. The portfolio’s mix of different companies means it often performs quite differently than many others in the global income sector. It could work well with more growth-focused funds, or be used to add some international exposure to UK-centric portfolios.

Manager

Jacob de Tusch-Lec is far from what you’d call a conventional global income manager. He’s not afraid to venture into areas others don’t dare, such as out-of-favour companies and higher-risk smaller companies and emerging markets. It takes courage to invest against the crowd, especially during times when it doesn’t work. De Tusch-Lec’s stayed broadly true to his philosophy during painful periods but his flexible approach means he can tweak and adapt how he invests depending on market conditions.

De Tusch-Lec began managing funds in 2005, but his first foray investing in global equity income began with this fund, which he’s run since it launched in July 2010. That means he’s built up more experience than most other global income managers.

He’s supported by co-managers James Davidson and Sam Morley. Davidson joined Artemis in 2018 bringing around two decades of investment experience and had worked with de Tusch-Lec at a previous company. Morley joined Artemis in 2015 on the graduate scheme and has worked his way up to his current position.

We like the challenge and support gained by working as a trio. Our conviction, however, lies with de Tusch-Lec.

Process

The managers scour the globe for companies they think can earn plenty of cash that can be used to pay dividends. De Tusch-Lec looks beyond the usual names that make up many global income portfolios, and will often invest in out-of-favour companies at attractive prices, those that are more sensitive to the health of the economy and those lower down the size spectrum.

Most of the companies in the portfolio are large and well-established though. And not all de Tusch-Lec’s stock picks go against the grain. He recently invested in Microsoft, which he views as an attractively-priced way to achieve bond-like income with growth on top. He’s still very much got a bias towards investing in unloved companies though, such as car maker General Motors, oil & gas drilling contractor Borr Drilling and Dutch bank ING.

De Tusch-Lec combines his company selection with a strong view on where the global economy is headed, and will tilt the portfolio according to his outlook. This so-called ‘top down’ approach is difficult to do. Economies can be unpredictable, so he admits he won’t always get his forecasts or his timing right.

The fund offers plenty of diversification, and no single company or sector makes up a big part of the portfolio. The number of holdings has been coming down over the past year or so, from around 110 in mid-2019 to currently around 80. That’s partly been to manage redemptions from the fund, but is also so investments can have a more meaningful impact on fund returns. Although they don’t current feature in the portfolio, the manager can invest in high-yield bonds and derivatives, both of which add risk.

Culture

De Tusch-Lec is a partner at Artemis, and Artemis is a private company. We think this structure is a good thing for investors, as both manager and firm are focused on the long-term and can run funds without distractions from short-term shareholder demands. De Tusch-Lec manages another income fund but, given it’s run in a similar fashion, we feel this is a manageable workload for him. Artemis also provides an attractive environment for fund managers, allowing them the freedom to run money how they best see fit without imposing a ‘house view’ on them. It’s also a collegiate atmosphere, with managers supporting and challenging each other.

Cost

The fund’s available for an annual ongoing fund charge of 0.58%. It’s usually priced at 0.83%, but we’ve negotiated a 0.25% saving for HL clients. This lower charge is one of the lowest among IA Global sector funds. Our annual platform charge of up to 0.45% also applies.

Performance

De Tusch-Lec has performed better than the FTSE All World index for most of his tenure, but has struggled over the past few years and recently fell behind. His ‘value’ investing style has been out-of-favour with the market, which has rewarded companies with strong growth prospects. Although this trend has been going on for several years, it’s important to remember investment styles go in and out of favour. History shows value investing can work well over the long-term.

Investments in unloved sectors such as oil & gas and mining have particularly hurt the fund’s performance. Financial services, which make up more of the portfolio than any other area, have also fared badly during the recent market volatility.

Artemis Global Income Performance Since Launch

Past performance is not a guide to the future. Source: Lipper IM to 31/03/2020.

Unlike many other global income funds, this one normally does better than the benchmark when markets are rising, but has tended to fall further when they tumble. That makes it a more volatile option than most in the sector. It also means it could work well alongside other global income funds with a more cautious approach.

The fund currently yields 4.1%, which is comfortably above the global stock market average and impressive by global standards. Don’t forget though that yields are not a reliable indicator of future income as they can vary and income isn’t guaranteed. The fund’s charges are taken from capital, which can increase income but reduce the value of investments over time. The fund can fall as well as rise in value so investors could get back less than they invest.

Past performance is not a guide to the future. Source: Lipper IM to 31/03/2020.

Find out more about this fund including charges

Key investor information