Top quartile in terms of performance over the past 12 months, under-the-radar fund VT Cantab Sustainable Global Equity (BK5XL00) deserves a closer look. It was one of the few growth funds to deliver a positive return in 2022, a year where US stock markets experienced a miserable showing and growth investing as a style was out of favour.Having maintained its top quartile position for the past three and six months, it’s clearly doing something right. Don’t be put off the mere £41 million assets under management, there is a lot to like about this fund.

Shares believes this carefully constructed portfolio of 35 quality names, operating in a diverse batch of sectors and bought at attractive valuations, should allow risk-averse investors to sleep at night by holding up better than its sector during market selloffs while participating in market upswings. It has a 0.91% ongoing charge.

Yes, the outlook for the global economy is somewhat clouded. However, quality companies with sustainable franchises and fortress balance sheets should continue to flourish in what could prove to be uncertain times ahead.

DISCIPLINE AND PATIENCE

Managed by Cantab Asset Management’s Mark Wynne-Jones, a seasoned equity analyst and fund manager, the fund seeks to generate superior risk-adjusted returns through a disciplined and patient investment process. Warren Buffett-fan Wynne-Jones’ process focuses on investing in responsible companies with sustainable franchises at attractive valuations and holding them for the long term.

Since its late 2019 launch, a few months before the onset of the pandemic, VT Cantab Sustainable Global Equity has produced a robust performance, generating a three-year cumulative return of 37.4%, ahead of the 32.4% delivered by the IA Global sector.

Wynne-Jones’ philosophy posits that quality companies, which typically trade at premium valuations, generate superior risk-adjusted returns to investors, as long as they are purchased at attractive valuations with a margin of safety, and held for the long term.

The fund manager adopts a glass half-empty approach to analysis, focusing at least as much on downside risk as upside potential.

He says investors should think of the approach as being Warren Buffett and Charlie Munger with an ESG (environmental, social and governance) overlay, since the fund’s investable universe excludes companies involved in the production of fossil fuels and armaments as well as alcohol, tobacco and gambling stocks.

Quantitative and qualitative analysis is also used to assess whether companies are paying due attention and consideration to ESG concerns and are demonstrating this through their policies and practices.

Wynne-Jones insists that if investors can manage risk in the short term, they are far more likely to deliver superior returns in the long run. Given the recent failures of Silicon Valley Bank, Signature Bank and Credit Suisse, investors may be reassured that the fund owns no banks, though it does hold a pair of insurers in MetLife (MET:NYSE) and Aviva (AV.).

Wynne-Jones’ preference for strong balance sheets is demonstrated by the fact that seven of the portfolio’s non-financial stocks have net cash positions, while a further 13 have estimated 2023 net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) ratios of less than one times.

WHAT’S IN THE PORTFOLIO?

The fund’s top 10 includes Google-parent and AI play Alphabet (GOOG:NASDAQ), Danish drug maker Novo Nordisk (NOVO-B:CPH) which is benefiting from growing excitement over its Wegovy obesity offering, and Spanish travel industry software concern Amadeus IT (AMS:BME).

It has a stake in consumer staple General Mills (GIS:NYSE), the food multi-national that makes and markets breakfast cereals Cheerios and Lucky Charms in a partnership with another of the fund’s holdings, Nestle (NESN:SWX).

Investors putting money into the fund will get exposure to Akamai Technologies (AKAM:NASDAQ), a leading player in internet content delivery and security expanding its cloud computing offering, as well as Swatch (UHR:SWX), the pure-play collection of luxury watch brands which Wynne-Jones believes is too lowly valued for such a unique asset.

Shares in the world’s largest watchmaking group behind brands including the namesake Swatch as well as Omega, Harry Winston, Tissot and Longines, ticked higher in the first quarter of 2023 thanks to the reopening of China as well as the successful launch of the ‘MoonSwatch’.

Of late, VT Cantab Sustainable Global Equity has added to its position in Trend Micro (4704:TYO), Japan’s largest specialist software security company which is tapping into opportunities created by the rise in cyberattacks globally.

Wynne-Jones has also bought shares in PayPal (PYPL:NASDAQ), the digital payments firm he believes has longevity despite transaction margin pressures and competition from the likes of Apple (AAPL:NASDAQ) whose own payments system is growing fast.

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