Manager Research

We have recently completed our review of the Nedgroup Investments Global Equity Fund. We have downgraded the fund’s rating from Tier 1 to Tier 2. As a reminder, a Tier 2 rating is a positive rating where we have some concerns we are monitoring.

Veritas Asset Management (Veritas) is the underlying investment manager responsible for this fund and we continue to rate the business positively. The shareholding structure is appropriately designed to support long term investment management, the product range is focused, and the global equity strategy is well supported.

In 2022, Veritas made some changes to the Global Equity Fund’s portfolio management structure with Andrew Headley now co-managing the portfolio with Mike Moore and Ian Clark. Below, we provide a timeline of changes to the portfolio management structure of the fund.

At the same time, Veritas took the opportunity to change its decision-making process. They have moved to a consensus-based approach, where all three managers must agree for a stock to be bought (or increased), and two of the three must agree for a stock to be sold (or trimmed). Prior to this, Andy Headley and Charles Richardson managed the fund until Charles’ transition to an advisory role (Mike Moore taking over). Andy served as the Lead Fund Manager and was ultimately responsible for the strategy and final decisions on stock selection. This change to a three-PM, consensus-based, structure aims to reduce the number of errors over time and have a higher chance of identifying risk.

As a reminder, Veritas aims to protect and grow the real value of clients’ capital by buying high quality businesses at attractive valuations. Although they have typically demonstrated an ability to identify and invest in high quality businesses over longer periods of time, we have some concerns around their ability to avoid lower quality businesses given their relatively stringent valuation discipline and track record. In addition, we believe that the changes to the portfolio management structure have to an extent been implemented by Veritas to address this concern.

In our opinion, this new portfolio management structure as well as enhancements to the decision-making process, may be positive developments but they represent significant change. As a result, we would like to monitor this new process and test how effective they are over an appropriate period of time.

For those reasons, we feel that a Tier 2 rating is appropriate.