Fundamentalist arguments between growth and value true-believers have hit fervourous heights in COVID times but not all investors joined the crusades.
Karyn West, head of Australian multi-affiliate firm Apostle Funds Management, said while investors on both sides of the traditional divide have valid points – value has long underperformed, growth has “valuation concerns” – the battle is an irrelevant distraction for some.
West said Dundas Global Investors, for one, has maintained its decade-long style-agnostic strategy despite gyrations in value-growth indicators since the brief, but violent, market crash in March 2020.
The Edinburgh-based Dundas, founded by Alan McFarlane, has consistently sought global companies capable of regularly churning-out sustainable dividend growth – an almost old-fashioned concept in markets where investment religions tend to focus on either profitless firms with future potential or value-based revival stories.
“Since COVID Dundas has made no major portfolio changes,” West said. “A couple of stocks in the portfolio have been hit but mostly it’s been steady-as-you-go.”
Based on a core philosophy that 80 per cent of long-term returns come via dividend growth and yield, the manager has assembled a portfolio of 70 stocks with markedly different characteristics from the benchmark MSCI All Country World Index (ACWI).
Since inception in August 2012 until the end of June this year, the Apostle Dundas Global Equity Fund has returned an annualised gross 13 per cent compared to 11.9 per cent for the ACWI.
But dividend growth represented over 10 per cent of the Dundas return against just 3.2 per cent for the broader index.
“The investment approach creates a portfolio of more stable, high-quality businesses that are growing and rewarding their shareholders,” West said. “Regular and sustainably growing dividends also offer some protection against inflation.”
In a recent publication, she notes that allocating to dividend-growing companies represents “one of the most powerful” ways to ward off the impact of inflation on portfolios.
“There are many companies with strongly growing businesses that are capable of sustained, real dividend growth of 5 per cent per annum and more over the long-term, well-above prevailing inflation rates in developed economies,” West says in the article.
As well she said Dundas, which released an ASX-listed exchange-traded fund (ETF) version of the strategy earlier this year, tends to miss the worst of any market drawdowns without conceding upside participation.
Globally Dundas has almost US$2 billion under management with Australia and NZ an important market for the firm with over A$1.3 billion in the local vehicle.
“NZ is a quite significant part of that,” West says.
Dundas is represented in NZ by Heathcote Investment Partners.
Other Apostle managers – such as US-based direct real estate firm Kayne Anderson – could get an airing this side of the Tasman, West said.
She said Apostle also had a “zero tolerance” multi-manager impact strategy in the pipeline using the group’s affiliate partners, covering off all the hard-core environmental, social and governance (ESG) beliefs.