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1 August 2012
FOUR is currently talking with third parties to attract cornerstone investments, but in any case, the live portfolio will start in September with a US$50m segregated account.
FOUR’s wider portfolio, Active Global, has been going since December 2010. Colin McQueen, head of the Global team, says “The focus of the Stable Global strategy is to deliver attractive real returns (CPI + circa 6%), but with much lower volatility and downside risk than the wider equity market. The portfolio will concentrate on the most stable portions of the equity market (roughly 30%) consisting of companies with the most robust businesses, with low cyclicality, low capital requirements and strong balance sheets. The portfolio should consistently exhibit lower volatility than the overall equity market. It should also perform better than overall equities in a weak or moderately rising market, but may lag in a sharply rising market.”
Colin added “The greater stability of the portfolio derives from the greater stability of the underlying earnings in times of weaker overall market earnings, which we are experiencing at the moment. The initial Free Cash Flow Yield of Stable Global is 8.0%. If we simply assume that the underlying companies can grow earnings and cash flow in line with CPI, we should be able to achieve a real return of 8%+ over time. This represents a substantial premium compared to c.0% real yields from index linked government bonds.”
Derrick Dunne, a founding partner of FOUR, said “There is clearly a growing demand for a high quality low volatility global equity product, particularly in the current climate. The potential for real returns from equities looks very attractive relative to other asset classes such as index-linked or conventional bonds. One of the main drawbacks for many institutional investors is the higher volatility of returns from equities and the memories of recent losses. We are confident that Stable Global Equity can help to bridge that gap and deliver on its performance objective. Colin has been investing in global equities very successfully, in up and down markets, for over 20 years.”
Colin McQueen said “It has been a personal ambition to manage a lower volatility product utilising our successful value driven investment approach which has now been going for over two decades. This product should be ideal for pension funds, charities and endowments that have demanding risk budgets and are looking for lower volatility options.”
Colin McQueen joined FOUR in October 2010 as a senior global equity fund manager. Prior to joining FOUR, he was Managing Director and Head of Global Value Equities at Morgan Stanley Investment Management. In this role, Colin was responsible for the management of $2.0bn of global equities. Prior to this position, Colin had been Managing Director and Portfolio Manager at UBS, where his team managed $36bn of global equities.
During his 16 years’ experience at UBS, he was also Portfolio Manager for US equities and Fund Manager for UK Equity and Balanced Funds where he assisted with the management of £1.1bn of assets. Colin holds an MPhil in Economics from the University of Cambridge and is a Associate of the Institute of Investment Management and Research.