Thematic strategies have had a tough year, but Alex Araujo’s £2.4bn M&G Global Themes fund has managed to maintain a positive return as its peers have faltered.
The fund has returned 3.7% over the past year compared with an average loss of 5.7% for Citywire’s Global Themes sector over the same period. Over three years the strategy has returned 36.2%, outpacing an average return of 25.8%.
Araujo attributes the portfolio’s resilience to its comparatively straightforward strategy.
‘We take a very patient, long-term approach that’s often seen as boring,’ he said.
‘That may have cost us in certain episodes when the market was rewarding much more exciting things than the companies we invest in. We tend not to get caught up in fads.’
In this video Araujo discusses some of the stocks he is most bullish on, including his top holding – Canadian company PrairieSky Royalty, which generates royalty revenues from oil and gas companies that use the firm’s property.
He argues the firm is ESG compliant, despite it generating the bulk of its royalty revenues from carbon emitting activities.
‘The beauty of a company like PrairieSky Royalty is it doesn’t do the extraction. It doesn’t have the environmental liability, or the Scope 1 emissions that are seen as controversial in the investment world,’ he said.
The stock is up 44% over the past year and has been one of the most significant contributors to the fund’s performance, accounting for nearly 5% of the portfolio.
The fund manager also discusses why Microsoft is a thematic play and why he thinks scepticism of Intel is unjustified.
Intel was hit hard during the market rout and has seen its share price fall by nearly 45% this year. The stock makes up just over 2% of the fund.
In addition to feeling the bite of inflation in 2022 along with other tech firms, the chipmaker has also been criticised for lagging in terms of innovation, with the likes of AMD and Apple lauded for producing faster computer processors.
Araujo also defends the fund’s 6% allocation to China, with Tencent being one of its top 10 holdings. In his view, the firm’s valuation has become attractive after a sell–off over the past year.