Phillip Capital Management has announced the launch of its new equity fund, the Phillip Global Rising Yield Innovators Fund.
The fund, which will be launched on August 28, “seeks to identify enabling or disruptive innovative enterprises, working to bring new and unique solutions to solve today’s and tomorrow’s high-value problems”.
According to Phillip Capital Management, companies relevant to this innovation theme are those that rely on or benefit from the development of new products or services, technological improvements and advancements.
Phillip Capital also said that the Covid-19 pandemic has exposed a drawback of the traditional “pure dividend strategy”, where investors invest into traditional businesses for high dividend yields.
This phenomenon is further reflected by the contrasting performance between tech indices and other market indices.
It cited that the lack of technology stocks in the local stock market has resulted in the poor performance of the Straits Times Index (STI) during this downturn.
On a year-to-date basis, the STI is down 19.6% as of 25 June 2020, while the US major tech index Nasdaq Composite is up by about 11% and still trading at record territory.
As such, the fund’s investing strategy is to invest primarily in a portfolio of global equities with quality businesses that generate sustainable long-term value.
It also believes that superior, innovative companies with growth models that are resilient in economic downturns will continue to ride on secular growth tailwinds.
In doing so, it aims to achieve a net fee of return that exceeds that of its reference benchmark, which is Dow Jones Global Select Dividend Index.
Phillip Capital added to avoid potential value traps hampering returns, the fund will seek to avoid cyclical or old economy stocks that may be once-stable. “In our view, innovative companies could be more resilient in economic downturns to deliver higher than average return on investment over the long-term horizon.”
Linus Lim, director and CEO of Phillip Capital Management says, “Our investments will combine technology companies that are current market leaders as well as companies that have the potential to scale up. One aspect of our strategy will be to consider growth leaders that are beginning to mature over time and as their cash flow grows will also create more income opportunities for our investors.”
