Rhodes show: A decade at the helm

17/07/2018

It is almost 10 years since the launch of the M&G Global Dividend fund. Since then it has grown to over €7 billion* in size, investing in companies growing their dividends around the world. Manager Stuart Rhodes discusses the highs and lows of the past decade.

Have you achieved what you set out to achieve 10 years ago?

We had a number of specific goals, but the most important was to deliver a growing income stream. We sought to focus on companies with growing dividends, so we could grow the distribution from the fund. We’ve done that.

At the same time, the income has been consistent. We’ve raised it every single year. This is regardless of markets or currencies – most geographic regions and sectors have their time in the sun, but the fund has delivered consistent compounding. Looking forward, this will continue to be our ambition.

Please note that the value of investments and the income from them will rise and fall. This will cause the fund price, as well as any income paid by the fund, to fall as well as rise. There is no guarantee the fund will achieve its objective, and you may not get back the amount you originally invested. Past performance is not a guide to future performance.

What have been your biggest challenges?

When we launched in 2008, we went straight into the financial crisis. The first quarter of 2009 was tough, the worst dividend environment since the Second World War. In the end, the circumstances probably helped us build some of our track record, but a lot of funds blew up and it was certainly a difficult and nerve-wracking time to invest.

More recently, we had a period of underperformance for 18 months or so in late 2014/15. This happens to  all active managers, but it was a challenging time nevertheless. We were confident in the underlying businesses in our portfolio, but we were getting a lot  of questions from clients. We continued to do the   work and some of those positions – notably those in energy and materials – paid off in the end. In the last two years, we have been rewarded for holding the line.

One thing I would add about these two tricky periods is that they both gave us the greatest opportunities to invest at fantastic prices. We had done enough analysis to go against the grain. Past performance is not a guide to future performance.

Are there any businesses that you have held from inception?

If we find a business that can grow sustainably, we don’t see any reason to sell it – as long as the valuation is reasonable, of course. As such, there are some investments we’ve held for a long period of time, including some right from our launch – such as Arthur J Gallagher and Methanex. These investments (and others) have stayed in the portfolio all the way through and could stay for a lot longer.

Where are you positioned today?

Markets have gone up quite a bit. We run a global fund and that gives us a big universe. We can still find some compelling investment ideas, but the opportunity set   is certainly narrower than it was.

With companies trading at higher valuations, it is even more important to know what you are looking for and do the work on individual companies. This is the type of market environment where it will matter more. Investors have tended to get caught up with popular trades and there are some companies where valuations are simply not justified.

In consumer staples for example, prices have gone up significantly and we believe there may be quite a long way to fall for businesses that show operational weakness. We are spending a lot of time on individual stocks, getting into the weeds. We don’t believe a particular trend or theme will dominate – we simply need to have a deep understanding of the businesses in which we’re invested.

On the flip side, we are still finding opportunities in companies that the market has treated pessimistically. To our mind the more attractive valuations sit within cyclical areas today.

What do you see as the key risks for markets?

If we got a broader trade war, it could become problematic. Trade wars tend to have nasty implications for supply chains generally. At the moment, we have  just seen some early shots fired. That said, there are always risks. It is the beauty of investing in equities and why they tend to do well over time. It is our role to try and understand whether the risk delivers an opportunity or not.

In 2017, we saw low volatility and this didn’t throw up many opportunities. 2018 may be trickier, but it is where real investors should be rolling up their sleeves. If you don’t have the kind of personality where you get a little excited in tougher times, you’re in the wrong job.

The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash.


Fund track record since launch

  YTD 2018 2017 2016 2015 2014 2013 Annualised since launch
M&G Global Dividend Fund €A
+1,3% +8,4% 19,3% -2,3% +9,2% +20,4% +10,1%

Source: Morningstar, Inc. as at 31.05.18, price-to-price with income reinvested, based on Euro A Acc Shares. Launch date: 18 July 2008.

Past performance is not a guide to future performance.

Source of assets under management: M&G Statistics as at 31.05.2018. For Investment Professionals only. Not for onward distribution. No other persons should rely on any information contained within. Distribution of this document in or from Switzerland is not permissible with the exception of the distribution to Qualified Investors according to the Swiss Collective Investment Schemes Act, the Swiss Collective Investment Schemes Ordinance and the respective Circular issued by the Swiss supervisory authority ("Qualified Investors"). Supplied for the use by the initial recipient (provided it is a Qualified Investor) only. The collective investment schemes referred to in this document (the "Schemes") are open-ended investment companies with variable capital, incorporated in England and Wales in respect of M&G Investment Funds and in Luxembourg in respect of M&G (Lux) Investment Funds. The Instrument of Incorporation, Prospectus, Key Investor Information Document, annual or interim Investment Report and Financial Statements, are available free of charge from the ACD: M&G Securities Limited, Laurence Pountney Hill, London, EC4R 0HH, GB; or one of the following - M&G International Investments Limited or its French branch; the French centralising agent of the Fund: RBC Investors Services Bank France; M&G International Investments Switzerland AG, Talstrasse 66, 8001 Zurich; or Société Générale, Paris, Zurich Branch, Talacker 50, P.O. Box 5070, 8021 Zurich, which acts as the Swiss representative of the Schemes (the "Swiss Representative") and acts as their Swiss paying agent. Before subscribing investors should read the Prospectus, which includes investment risks relating to these funds. This financial promotion is issued by Securities Limited. Registered Office: Laurence Pountney Hill, London EC4R 0HH, authorised and regulated by the Financial Conduct Authority in the UK. Registered in England No. 90776.


Viewing this website in Switzerland is not permissible with the exception of the distribution to qualified investors according to the Swiss Collective Investment Schemes Act, the Swiss Collective Investment Schemes Ordinance and the respective Circular issued by the Swiss supervisory authority ("Qualified Investors"). Supplied for the use by the initial recipient (provided it is a Qualified Investor) only, not for onward distribution to any other person or entity.

The value of the fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.