Growth fund manager skews defensive on ‘tougher’ outlook

Fund manager Martin Currie Australia has tilted its multi-sector growth portfolio towards defensive investments on the outlook for a tougher return environment. 

Chief investment officer Reece Birtles told Financial Newswire that he considered global equities to be overvalued, with the internal rate of return on a seven-year investment horizon – a key metric for his team – sitting below average. 

In response, the Martin Currie Diversified Growth Fund – Class A, winner of the Multi-Sector Growth category at the Financial Newswire/SQM Research Fund Manager of the Year Awards 2024, reduced its exposure to global shares from 23% to 19.2% in December last year. 

Martin Currie is a specialist investment manager within Franklin Tempelton and relies on the global investment firm’s managers to find the best opportunities associated with the asset classes that Birtles and his team identify.  

He and his co-portfolio manager, William Baylis, are favouring real assets (18.4% of the portfolio), including real estate investment trusts, infrastructure and utilities, which tend to be more defensive than broader equities.  

They have also increased the duration in their fixed income exposures, prompted by signs of a “very difficult investment environment”, such as the US Purchasing Manager Index declining to below 50, an indicator of the direction of economic trends in the manufacturing sector. 

“We see the likelihood for earnings growth for companies to be weaker,’ Birtles, who has been with Martin Currie for three decades, said.  

“We see the likelihood that bond yields will be lower, and you’re likely to get rate cuts.  

“Those things would all be good for the asset allocation that we currently have.”

However, he emphasised that his Melbourne-based team was not trying to time the market. 

Instead, as value investors, they are looking at the expected rate of return from today’s prices to normal. 

“It means that when you’re at the top of the market cycle, we’re probably going to be more defensive, and when you’re at the bottom of the market cycle, we’re going to be more aggressive,” Birtles said. 

“You tend to find a lot of people like to talk about what’s hot, what’s working, as their approach; we’re doing the opposite.  

“Often things that are very popular and talked about are where there’s excess risk or there’s been an excess allocation. So, we’re going against the crowd most often.”

The Martin Currie Diversified Growth Fund – Class A has performed slightly below its benchmark, the Martin Currie Diversified Growth Benchmark Blend (AUD), over a five-year period, delivering 6.26% per annum net versus 6.72% as at August 31, 2024).

The fund is open to retail and wholesale investors, with a minimum initial investment of $25,000, which may be different on platforms.