A few “enduring themes” have emerged from an analysis of the current Nikko Asset Management NZ portfolio, according to head of equities, Stuart Williams.
Williams told the Workplace Savings NZ (WSNZ) conference in Wellington earlier this month, that the intertwined themes of an aging demographic and healthcare would likely be long-term drivers of returns.
In his presentation titled ‘Looking beyond 2015 …. what is driving investment themes for your scheme?’, Williams said the two underlying factors were discernible in Nikko’s NZ equities portfolio.
New Zealand firms with exposure to offshore earnings were also well-placed to benefit from the falling dollar, he said.
Williams highlighted Fisher & Paykel Healthcare as an overweight stock in Nikko’s current portfolio that ticked all three boxes.
He also name-checked retirement home providers, Summerset Group, Metlifecare and Japara Healthcare, as three Nikko-favoured stocks that reflected the aging/healthcare dual thematic.
However, Williams said while the actual portfolio clearly reflected these themes, they emerged out of Nikko’s bottom-up process rather than via a conscious thematic approach.
He said Nikko’s investment team regularly reviewed the portfolio for emergent themes, which they explicitly evaluate.
“We look at how our stocks match a certain theme, and what confidence we might have in those themes,” Williams said.
He said fund managers have a distinct advantage over high net worth investors when implementing ideas in their portfolios.
According to Williams, “private bank type” high net worth investors often try to adapt fund managers’ ideas in their portfolios but usually can’t diversify adequately, monitor the investments closely enough or implement changes quickly.
“Typically, high net worth investors will seize on fund manager themes and build a four or five stock portfolio around them,” he said. “But themes and valuations can change very quickly and most individual investors don’t have the resources to manage that.”
Williams also told the WSNZ crowd that investors would demand a higher level of disclosure from fund managers under the Managed Investment Scheme (MIS) regime, including information about relative stock weightings in their portfolios and capacity issues.