The idea behind the construction of the fund is to build a diversified portfolio in such a way as to allocate by theme instead of sector.
- Talent & Ingenuity (companies that thrive on intellectual property and talent) 18.52%
- Global Agribusiness (you know what this one is) 16.12%
- Disequalibria (industries where circumstances force change and innovation) 15.97%
- Supply Chain Dominance (companies that can squeeze suppliers) 9.46%
- Large Units (companies that benefit from global growth in consumerism) 8.36%
- New Annuities (companies whose businesses create an annuity like stream) 7.32%
- Private/Public Partnerships (by way of example Deutsche Post and an airport) 4.81%
- Security (more than just defense contractors) 4.56%
- Asymmetric Negotiators (companies that can conduct one-sided negotiations) 3.42%
- Market Hedge (they use mining stocks here) 3.05%
- Ex-Atrophy (companies leading Japan out of its long time stagnation) 2.89%
- Distressed Companies (you know this one too) 2.84%
I should add that the fund gets five stars from Morningstar. Over the last seven years it beat MSCI EAFE Index (not sure if that is the fund's benchmark but that is they index M-star uses to compare) three times, lagged it four times and YTD is ahead. I'm not sure what makes it a five star fund, not a shot, I really don't know.
I'm not really interested in the fund or the themes they chose but the idea of constructing a portfolio from the top down via themes important to you is an interesting concept. For discussion's sake what themes would be important to you and how could you access those themes?
Here are some that I think are important and more importantly will continue to be important for a while to come;
- Water (can be accessed with ETFs or stocks but the precision of certain stocks might be better)
- Infrastructure (current ETFs are fairly blunt but have some purpose, stocks again can be more precise; engineers, toll roads and so on)
- China (to use ETFs is to be comfortable with heavy financial exposure with two of them or some solar with the other)
- Frontier Ascendancy (here ETFs, when they come, should capture this theme very well)
- Inflation (commodities, which can cover a lot of ground with different sorts of products, and TIPS would seem like a simple way to go
- Increasing Resource Demand (obviously overlaps with inflation above)
- Surplus Countries (the idea here being countries at the opposite end of various spectrums from the US)
I think a diversified portfolio could be constructed around these themes (or any of your own) to take in different sectors, cap-sizes, countries, volatilities and the like but it would take a lot of work. Despite the thesis put forth by SCOBX' manager that this sort of construction can deliver diversification it would seem very easy to end up with lopsided bets.
The theory behind the fund is unlikely to cause anyone to redo the way they do things but it stretches the thought process a bit which is always constructive.I've been writing about investing in themes for as long as I've been writing so I am a believer but I add it in differently.
As a function of what I read and otherwise observe, certain themes resonate and then I try to figure out how to work them into the portfolio.
As an example, when I had exposure to China before I felt that the best way in was with the oil companies. China's usage is obviously increasing and this helped all the Chinese oils. The next time I go back into China it will be another way as I no longer think the oils are the best way.
So when I had Sinopec (SNP) it was part of the allocation to energy. If I were to go back in with a bank (this is an example only, I'm not sure how I will go back in but it won't be with a bank) then it would obviously be part of the allocation to financials.
That explanation is probably obvious but in case it isn't...
After the action on Thursday and Friday we may all need one of those little cars.
12 comments:
I have owned Global Thematic for years. It has several tickers including SQGAX which are the A shares. (originally Kemper funds). It has a great 1, 3, 5, 10 year record. They have also included it in the Core Plus Allocation Fund (CORAX)
http://millionairenowbook.blogspot.com/2007/02/my-asset-allocated-fund-portfolios-as.html
Rog,
I visited the "tin hat" store recently - you know, the blogs that are filled with those that are convinced that it is a high priority to be buying guns, bullets and portable stores of value that you can bury or keep on your person.
I suppose Friday after Thursday suggested at least peeking over the hedge (no pun intended).
But one thought did emerge out of much of the silliness: if "Peak Oil" is now no longer over the horizon, but actually visible, is there a systemic threat from Oil and oil futures becoming a global reserve currency?
With globalization/information making this time truly different (on some level), and the dollar (and the US treasury) no longer representing the safe haven in times of great turmoil, aren't the knock-on effects of 'flight to oil' (potentially a finite commodity, and therefore an institutional store of value) somewhat systematically destabilizing and amplifying? The consequence of rising gold prices did not, it occurs to me in my ignorance, have the same immediate operational consequences to local and world economies as does the rising price of oil.
I appreciate (as your video this week suggests) that capitalism can work through these shocks, and that hindsight will make the workout appear inevitable and obvious. But in the meantime, could you comment on - 1. whether this is just a tin hat concern, and 2. What might be a suitable defensive position (or what opportunities you might see with oil above 150/bbl, even if temporarily...
Thanks, and looking forward to the coming trading week.
Rick
Rick, I'll try to ponder on that and hopefully come up with something moderately useful but in the mean time is the obstacle to oil (one way or another) as a proxy for currency the threat of delivery?
Once a barrel of oil shows up on your driveway what then (from a practical standpoint)? Now multiply that dilemma by 1000 (the number of barrels that I think underlie one contract).
I may never have a great answer for you but for now that would be my question.
Back in the late 80's and early 90's when I owned a few shares SCOBX was the Scudder Global Bond Fund (Scudder was a separate fund company then); not a great performer but there weren't a lot of ways for the average retail investor to access international spaces/products in those days.
Looks like the fund has gone through a reincarnation or two since then, something that is not uncommon in the financial industry generally and the mutual fund business specifically. In fact it is sufficiently common that it creates a cautionary tale: Any time a fund company wants to bury a bad record they can merge a fund into another fund and/or change the fundamental policies of a fund w/ SCOBX being a case in point (a thematic allocation fund is a long, long way from a global bond fund).
I could say it's too bad I didn't hold on to my SCOBX shares except that the bulk of the time in between it would probably have been dead money and I would have gotten whiplash in any case trying to keep track as it was sold to other companies, funds were merged into it and/or its policies changed. My portfolio program indicates I liquidated SCOBX Sept of '92 at $19.57/sh w/ no particular reason to look back.
A couple of the themes in the current incarnation of SCOBX might be interesting, others appear sound but already represent well known principles -- e.g, the concept of a 'moat' around a company's business -- or seem to be redundant; e.g., what exactly is the difference between a 'supply chain dominator' and an 'asymmetric negotiator' and is it a difference that actually makes a difference?
Of Roger's themes I would say the toughest to capture would be water and inflation in part because they conceptually cover so much ground. For example, commodities may do well in supply shock inflation (used to be part of the cost-push inflation model) but may only hold their ground in demand-pull or built-in forms of inflation; the latter two accentuate money supply problems and would probably be better countered through stronger currencies and floating interest bonds than commodities and TIPs for instance.
Many themes emphasize scarcity but it's worth remembering that some themes emphasize want in a different sense altogether. Try this on for size (forget the sociopolitical aspects for a moment, this is an investment blog and this is a potential investment theme): The growing gap between rich and poor.
This theme is significant to investors because there are an order of magnitude more poor than rich and even though many new members of the middle and upper classes are being added in places such as India or China that is more than offset by the additions to the ranks of the impoverished; e.g., those who used to manage as small farmers are now day-laborers in the cities.
This must eventually have a negative effect on the velocity of money (Fisher equation) because the poor have great difficulty saving or investing and their money tends to circulate faster because of this and also recirculates faster because of the ways it is spent; e.g., in small businesses run by those who are also rather poor who then spend it in turn. When the poor have less to spend overall then money velocity must fall. Reductions in money velocity can turn a moderate disinflation into deflation and while this is admittedly less likely in a fiat currency economy (deflation was endemic when hard currencies were the norm) the potential for utter economic ruin in a deflation is high enough that it should still have a place in the thematic universe. In any case it is certainly a member of the constellation I consult. FWIW
Roger,
Thank you for the post - interesting as usual.
Where can I find information about where countries stand on the surplus/deficit spectrum?
Thanks,
SA.
SA,
each central bank has the info somewhere there, some easier to find than others.
also the website for the economist (as in the magazine) has a page with this info for a lot of countries.
Re: Growing gap between rich & poor. Good point! Check out this URL to pursue this theme: http://www.kiva.org/
You won't make much money that way but I guarantee you will get an awful lot more satisfaction from your outlay.
Willy
Anon , as to direct investment I never said the return had to be 100% pecuniary, so in the spirit of reciprocity here's one with a 30:1 leverage ratio @ http://tinyurl.com/5xhu5b : Now that's some bang for the buck even if the personal pecuniary ROI is minuscule.
But my previous comments remain unaltered: The possibility of a deflationary regime appears to be discounted heavily w/ no risk premia I can see and that snaps my capitalist snout right up into the wind seeking truffles galore and hedges to explore (YMMD)
Meant to 'address' that to Anon 4:59 (Willy) up there; oh well.
Just posted a poll and would like to see it there is any consensus; Where will the S&P 500 be 12 months from now?
www.regimenia.com
Thank you so much Roger!
The Economist site contains a wealth of information easily accessible and comparable.
Exactly what I was looking for.
SA.
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