By Canada Life | Nov. 9, 2021
On the Canada Life™ Portfolio Manager Connect Series, we connected with portfolio managers Richard Bodzy and Gregory McCullough to learn more about the Canada Life US All Cap Growth Fund. Through this fund, Putnam Investments (Putnam) aims to provide clients with access to durable growth companies it believes are structurally positioned to take advantage of multi-year growth trends.
We’re living in a period of extraordinary change, from the spread of high-speed Internet to revolutionary discoveries in health care. “Megatrends” like these are transformative and when coupled with disruptive ideas, innovations and economic forces, they open vast new opportunities across sectors. Are your client portfolios set to benefit as our world shifts?
A unique blend of growth style investing with a thematic lens
The Canada Life US All Cap Growth Fund is uniquely different because it folds a thematic approach into a growth investing framework. This is good news for clients who may not feel comfortable overhauling their approach to investing. Typical U.S. equity growth funds may only offer partial exposure to megatrend themes, and researching the right trends may not be a focus of the fund manager. Instead, Putnam applies extensive research in executing its thematic approach. These themes capture major transformations like the growth of direct-to-consumer purchasing (also known as controlled distribution) or the personalization of medicine.
This thematic approach is combined with a growth-investing framework that looks for companies operating in favourable markets and industries, with revenue and free cash flow that not only outpaces the market today but that are likely to continue growing.
What are the growth criteria Putnam considers?
- Expected level and duration of growth – The fund managers won’t necessarily own the single fastest growing stock. Instead, they seek out structurally advantaged companies with pricing power, large addressable markets, high EBITDA1 margins, lack of competition, and revenues and cash flows that can grow faster than the market and are durable across a variety of market conditions.
- Return profile of the business – The fund managers seek high and/or improving returns on invested capital. They prefer capital light businesses with wide protective moats. This means low capital intensity businesses with higher barriers to entry or strong competitive advantages, where the management teams can deploy capital for a positive return in excess of the cost of capital.
- Ownership culture – They identify businesses with managers who act like owners, who have a strong history of value-creating capital deployment. They consider how much stock the managers own, their compensation structure and how they’re incentivised. This is important because it suggests that the manager’s interests are aligned with investors.
Fundamental research and industry analysis helps the managers be confident that these growth fundamentals are being met, allowing them to invest early rather than sit on the sidelines.
Putnam’s advantage
Putnam is based in Boston, MA with more than 80 years of experience actively managing investments and currently has US$203 billion in assets under management (as of Aug. 31, 2021). Portfolio managers Richard Bodzy and Gregory McCullough bring over a decade of experience in managing growth strategies.
Their expertise is backed by equity research analysts with diverse experience across industries who research, identify and help prioritize the right themes. Putnam’s powerful team of more than 30 research professionals across London, Boston and Singapore is able to see through the hype, helping to deliver a portfolio that can include companies of unusual promise.With Putnam’s multi-pronged investment approach, clients can gain access to a portfolio of high-quality companies that are poised to build on the bold ideas of tomorrow.
The views expressed in this commentary are those of this fund manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.
This fund is available through a segregated funds policy issued by Canada Life or as a mutual fund managed by Canada Life Investment Management Ltd. offered exclusively through Quadrus Investment Services Ltd., IPC Investment Corporation and IPC Securities Corporation. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. A description of the key features of the segregated fund policy is contained in the information folder. Any amount allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.
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