Holly Cook: Hello, and welcome to Morningstar’s series, "Why Should I Invest With You?" Joining me today is Graham Campbell. He's CEO at Saracen and manager of the Global Income & Growth Fund.
Graham, thanks for joining me.
Graham Campbell: Good morning. Thank you.
Cook: So, looking at the Global Income & Growth Fund's performance on an annualised basis over the last three, four years, it's been pretty strong, roundabout 10% per year, but the last two years have been quite weak compared to the previous two years. What are the headwinds that you're seeing there?
Campbell: We take a long-term view to our stock selection and the performance. But it's always nice with the short-term, also worked out well, but sadly as we know, it doesn't always happen. Last year was a year where we didn't find as much value in North America which is a large part of the MSCI Index. And we don’t benchmark against the index, but clearly the impact of the U.S. market being strong and also very strong dollar was a regular for us in 2014.
So far this year has been a very mixed year. We started very strong with the first four or five months where we found much more value towards more cyclical companies but with concerns about slowing growth in China, more defensive stocks have been in vogue for the last few months, though we are still very hopeful for the year as a whole.
Cook: You mentioned the U.S. there in valuations. I see looking at the portfolio that you're primarily invested into the U.K., Europe and U.S., though obviously it is a global fund. So what does that tell us about where you're finding opportunities?
Campbell: We tend to look underneath the companies at where the sales are and certainly, it is easier to find businesses are growing revenues, profits and dividends where there's more growth. So we do like emerging markets. The problem we found very often is that either the yields have been just too low or with poor returns on capital. But looking at the underlying sales of the portfolio, we have around a third in North America, a third in Europe and actually a third in the rest of the world. So we find business that are maybe domiciled in Europe but actually have lots of the sales in other parts of the world.
Cook: Now, obviously, you're looking for stocks that are going to provide both that income and capital growth part for the investor. Are there any specific sectors where you're finding, say, income opportunities or perhaps growth opportunities?
Campbell: I think in a portfolio there's always some of variety of drivers. Where in a very unusual situation just now where we're finding some very large companies that have very high yields, and normally which is regarded as worryingly high yields, sectors like, for example, some of the financial sectors, some banks, but also some oil and gas and resources and we found that we think that over the next couple of years most of that return will be from dividends. But actually looking out over three, four and five years, there's far more opportunity for capital growth as well.
Cook: Graham Campbell of Saracen, thank you so much for sharing your views with us today.
Campbell: Thank you very much.
Cook: For Morningstar, I'm Holly Cook. Thanks for watching.
