Neptune Global Equity Fund research update

Richard Troue | Tue 10 March 2015

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The US economy has gone from strength to strength over the past few months. Growth is robust and looks sustainable, while unemployment has fallen to 5.6%. All attention has now turned to when the Federal Reserve might raise interest rates, with the summer of 2015 being suggested as likely.

Robin Geffen, manager of the Neptune Global Equity Fund, argues the level interest rates ultimately rise to is far more important than the exact timing of the first rise. He believes the strong economy will lead to rates peaking closer to 3.5%, as opposed to the 1.5% currently expected.

The manager is currently positive on the outlook for the US and has invested 47% of the fund there, partly in companies which could benefit from rising interest rates. This includes financial companies such as CME Group, the derivatives marketplace that handles over $1 quadrillion of contracts annually; and Ameriprise, the asset manager with over $800 billion in assets under management and administration. Rising rates mean financial companies earn better rates on customer cash, while people tend to save and invest more when the economy is stronger.

Robin Geffen is also positive on the outlook for Japan, where around 37% of the portfolio is invested. He believes the government's ongoing economic stimulus efforts and a lower oil price will benefit both the economy and stock market. The lower oil price, for example, should enable big Japanese global multinationals to increase the prices they pay to their domestic suppliers. This raises profits, wages and capital expenditure, and is key to Japan's domestic economic recovery, according to the manager.

Elsewhere, the fund also has approximately 8% invested in India. Robin Geffen suggests Prime Minister Modi has not put a foot wrong since being elected in May last year. He is focused on delivering incremental reform, not 'big bang' policies, which should continue to have a gradual and beneficial effect. As a large importer of energy India should also benefit from lower oil prices.

The bulk of the fund's Indian exposure comes from an investment in the Neptune India Fund, which has a bias to medium-sized companies, the area of the market Robin Geffen sees as offering the best value currently. The fund operates a concentrated portfolio which allows each holding to have a significant impact on performance but this is a higher-risk strategy.

Two notable areas largely absent from the fund include the UK and Europe. This is because the manager sees significant uncertainty in the lead up to May's UK General Election and a potential EU referendum beyond that, while in Europe improvements to the economic outlook are too slow and small.

Our view on this fund

Robin Geffen has changed the focus of this fund significantly in recent years to reflect his changing views. The fund has gone from being focused on emerging markets and companies benefiting from the growth of emerging markets, to being more focused on the improving US and Japanese economies. We like the high-conviction approach used by Robin Geffen and if his views prove correct the fund could perform well.

In recent years the fund's performance has been lacklustre though and we removed it from the Wealth 150 in January 2014 after we lost conviction in Robin Geffen's stock selection ability. The fund has shown some improvement over the past year, but we would like to see this continue for longer before reconsidering it for inclusion on the Wealth 150 of our favourite funds across the major sectors.

Performance of the Neptune Global Equity Fund over the past five years

Past performance is not a guide to the future. Source: Lipper IM* to 02/03/2015

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.