advertorial. SEPTEMBER 2023. Citywire
Maximising the breadth of returns
‘Delivering consistent, repeatable returns through a high-conviction approach to investing is our core aim’, says Gary Hill, from Martello.
‘We always ask, what is the specific outcome we’re driving towards? What is the duration of that outcome, and how much risk are we prepared to take in getting there?’
Gary Hill
investment director
Martello Asset Management
For professional investors and advisors only
Since Phil Rose (Martello CIO) and I started to work together in 2011, we both felt that the investment approach would suit a fund and would allow us to reach a larger target investor base. It wasn’t until we founded Martello that this idea was achieved, so good things do happen if you persevere!
We established Martello in 2019 with support from a company that wanted a Jersey-based asset management business, who also had a large footprint in South Africa and other African markets. The synergies between what we were doing and what they wanted were very strong and allowed us to really build the business from day one, with a substantial amount of assets to start the business off and to bring our experience and knowledge of that market to their clients.
We launched the Martello Global Equity Fund in 2020 and supplemented that with the rand-denominated, local BCI Martello feeder fund in 2022.
For me, the best thing about managing the fund is seeing the pay-off coming through on our stock selection. Fundamental, bottom-up investing has faced some significant headwinds in the past 15 years, and even in 2023 to date, the factors supporting fundamental investing have swung around sharply. We believe it’s essential to have a tried and tested stock selection process to deliver returns in this environment.
What’s the best thing about being a manager of the Martello global equity fund?
Investing in global equities brings you the opportunity to boost returns from the growth of your portfolio. Gary Hill, investment director at Martello Asset Management, believes that their approach can be complimentary for a fund buyer looking to add high active share exposure to their existing core global equity holdings and it’s always very rewarding to be considered by a new investor as part of their investment selection.
Can you summarise your investment philosophy and process?
Our investment methodology was developed by Phil in 2001 and has a rules-based approach – the rationale for this is that if you ‘remove the emotions, you remove the biases’ to making informed investment decisions.
The initial quantitative screen involves metric-based filtering to provide a shortlist of prospective investment ideas, which are developed further via qualitative and relative performance evaluation before selection into the fund portfolio.
Our bottom-up approach to portfolio construction produces a focused, high-conviction portfolio of 25-30 stocks with approximate equal weighting. This, and the broad sector-range tolerances we allow, leads to a high active share fund which can capture the alpha opportunities we believe are inherent in our chosen markets.
We aim to select successful companies regardless of the typical categorisation of the stock, applying our chosen metrics for defining what characteristics such a company and investment exhibits.
How does Martello differ from other global equity funds?
We define our universe as developed global equities (ex-Japan) and are style-factor agnostic. We have the freedom to invest where appropriate, taking market conditions into consideration.
We are able to identify and take exposure to attractive investment ideas in many market conditions. That skillset separates us from many stylistic managers and removes the temptation to rethink our philosophy as market conditions evolve.
How is the fund positioned to deal with an inflationary / rising rate environment?
Our current stance on this began to evolve in late 2020, with the news of a successful Covid vaccine and the implications this would have on the global economy and post-pandemic recovery. As inflationary signals became more evident, we increased exposure towards cyclical sectors, supported by the relative momentum improvement in energy, materials, financial and industrial stocks.
The later move to rate tightening in early 2022 saw us reduce exposure further to certain growth sectors and go to a significant overweight to energy and financials, areas of the market that benefitted quickly from both a higher rate and commodity price environment, which to a degree, still exists at present.
Currently, with the Fed dropping its recession narrative and revising its core inflation forecast for the year, we feel that central banks are becoming more tolerant of above-target inflation, possibly for an extended period. We are maintaining a balanced exposure to both value and growth sectors at present, with consumer staples providing a further element of inflation hedging given their ability to pass price increases on to consumers.
The history of our value/growth/defensive exposure since the start of Martello is shown below.
How is the fund positioned to deal with an inflationary / rising rate environment?
Our current stance on this began to evolve in late 2020, with the news of a successful Covid vaccine and the implications this would have on the global economy and post-pandemic recovery. As inflationary signals became more evident, we increased exposure towards cyclical sectors, supported by the relative momentum improvement in energy, materials, financial and industrial stocks.
The later move to rate tightening in early 2022 saw us reduce exposure further to certain growth sectors and go to a significant overweight to energy and financials, areas of the market that benefitted quickly from both a higher rate and commodity price environment, which to a degree, still exists at present.
Currently, with the Fed dropping its recession narrative and revising its core inflation forecast for the year, we feel that central banks are becoming more tolerant of above-target inflation, possibly for an extended period. We are maintaining a balanced exposure to both value and growth sectors at present, with consumer staples providing a further element of inflation hedging given their ability to pass price increases on to consumers.
The history of our value/growth/defensive exposure since the start of Martello is shown below.
Where do you personally see the long-term opportunities for this fund?
As mentioned above, we see the fund being a useful and productive part of a ‘blend’ with other active or passive investment styles. Our sales approach is to ‘complement, not compete’ with other global equity options, and we feel there is space for the strategy to sit alongside these in model portfolios, both in South Africa and the wider offshore market.
What value can DFMs add to financial advisers?
Global Equity Strategy Style Positioning
Disclaimer
This document is for information purposes only and is not intended as an offer or solicitation to buy or sell securities. Martello Asset Management Limited does not make any warranties, express or implied, that the products or services referred to are available in your jurisdiction.
You must be aware that prices may fall as well as rise and that all investments are subject to risk, including the risk that you may lose all the money that you have invested. Income can fluctuate and is not guaranteed. Past performance is no guarantee of future performance.
Martello Asset Management Limited (“Martello”) is licensed and regulated by the Jersey Financial Services Commission and is authorised as a Financial Services Provider in South Africa by the Financial Sector Conduct Authority (License No: 51164).
The Martello Global Equity Fund (the “Fund”) is a cell of The Offshore Mutual Fund PCC Ltd (the ”Scheme”) (Reg No: 51900). The Scheme is an open-ended investment company, which was registered with limited liability in Guernsey on 20 May 2010, and is authorised by the Guernsey Financial Services Commission as a Class B Collective Investment Scheme. Martello Asset Management Limited is the appointed Investment Advisor to the Fund.
Please take advice from an appropriately qualified investment advisor and read the detailed risk disclosures in the Scheme Particulars before proceeding with any application for our products.
Our registered and business office is at: First Floor, International Finance Centre 5, The Esplanade, St Helier, Jersey, JE2 3BY.
Maximising the breadth of returns
Can you summarise your investment philosophy and process?
Our investment methodology was developed by Phil in 2001 and has a rules-based approach – the rationale for this is that if you ‘remove the emotions, you remove the biases’ to making informed investment decisions.
The initial quantitative screen involves metric-based filtering to provide a shortlist of prospective investment ideas, which are developed further via qualitative and relative performance evaluation before selection into the fund portfolio.
Our bottom-up approach to portfolio construction produces a focused, high-conviction portfolio of 25-30 stocks with approximate equal weighting. This, and the broad sector-range tolerances we allow, leads to a high active share fund which can capture the alpha opportunities we believe are inherent in our chosen markets.
We aim to select successful companies regardless of the typical categorisation of the stock, applying our chosen metrics for defining what characteristics such a company and investment exhibits.
Financial advisors are coming under greater pressure from both legislative and career learning perspectives. This added pressure means the time it takes for them to thoroughly research the market, as well as keep up with legislation and career learning, is becoming more and more challenging.
Introducing a DFM into their investment offering allows the financial advisor to focus on the advice, planning and management elements of their service. The DFM ultimately takes on responsibility for asset management within the financial advisor’s solution.
Other advantages of DFM’s included the ability for the assets to be managed on a real-time basis by qualified and experienced individuals and companies. This can allow the DFM to access and react to market opportunities above that of traditional financial advisors, who are often managing an extensive set of their clients’ other requirements and needs.
As a company, we are strongly committed to the investment needs of our African clients and aim to develop our brand and style of investment through the intermediary sector in the coming years.
Further information on the Martello Global Equity Fund and the BCI Martello Global feeder fund can be obtained at: martello-am.com/funds or by contacting Thomas Papenfus at thomasp@martello-am.com.
Financial advisors are coming under greater pressure from both legislative and career learning perspectives. This added pressure means the time it takes for them to thoroughly research the market, as well as keep up with legislation and career learning, is becoming more and more challenging.
Introducing a DFM into their investment offering allows the financial advisor to focus on the advice, planning and management elements of their service. The DFM ultimately takes on responsibility for asset management within the financial advisor’s solution.
Other advantages of DFM’s included the ability for the assets to be managed on a real-time basis by qualified and experienced individuals and companies. This can allow the DFM to access and react to market opportunities above that of traditional financial advisors, who are often managing an extensive set of their clients’ other requirements and needs.
As a company, we are strongly committed to the investment needs of our African clients and aim to develop our brand and style of investment through the intermediary sector in the coming years.
Further information on the Martello Global Equity Fund and the BCI Martello Global feeder fund can be obtained at: martello-am.com/funds or by contacting Thomas Papenfus at thomasp@martello-am.com.
Source: Martello Asset Management Limited
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