American Funds portfolio manager Jody Jonsson discusses the objectives of New Perspective Fund®, whose portfolio management team was recently named Morningstar’s International Stock Fund Manager of the Year. She also shares keys to the fund’s recent and long-term success.
Jody Jonsson: I think of New Perspective Fund as a fund of global champions. The fund’s charter is to invest in companies that benefit from changing global trade patterns, and that has basically been our objective since the fund was launched in 1973. Now the definition of “changing global trade patterns” has changed over time, but it has been a constant theme. So while originally it may have referred to importing and exporting, today it might refer to Internet commerce. There are many different ways to interpret the notion of changing trade patterns. We look at the companies for the fund as multinationals that need to have at least, say, a quarter of their business outside their home country but, more importantly, need to be true multinationals in how they operate — that they’re familiar with currencies and governments and regulations and taxes and all the things that go into being a mature multinational company.
Having this objective tends to screen out a lot of companies that are just newer, less experienced, less mature, and tends to focus us on companies that have really had their mettle proven and tested through multiple business cycles and economic cycles. I think that this has been part of the reason why NPF has had lower volatility than many funds in its category, because — again — it steers us toward more developed-market companies rather than emerging-market companies.
New Perspective is characterized as a growth fund, and it tends to own growth-oriented companies. But one shouldn’t pigeonhole it. If you look back at how our portfolios have changed in times of major changes in the market, we’ve had times when commodity and resource companies were among the largest holdings. Or telecom companies. At present, technology and health care are among our largest sectors. But it doesn’t mean that the fund can’t be flexible and go to wherever we think there’s the greatest value. We’re not necessarily pigeonholed into having to own high-growth companies, particularly if they if they get overly expensive.
New Perspective had a great 2015. I would attribute it to a couple of things. One, we didn’t have much representation in energy and commodities, so we avoided an area that was particularly painful last year; and two, we had very strong representation in technology and health care. Some of our largest holdings had very good years last year and contributed strongly.
Novo Nordisk* has been a large holding in the fund for many years, and what attracts us to it is that it has a tailwind of growth in its end markets. In China, in India, in Latin America, the incidence of diabetes — as well as in the U.S. — is really skyrocketing. Novo is focused almost entirely on diabetes as a disease; they’re really not in other disease classes. And they are the leader in terms of both insulin and other medications to diabetes, and also in the delivery in terms of pens and other implements. They have tended to always conservatively estimate the growth of their markets, and it has typically always exceeded whatever they projected, and so the company’s been able to grow its earnings at a mid- to high-teens rate for many, many years. They’ve also been very good stewards of capital — have paid dividends, have repurchased stock. And it’s a management team that is very solid, very trustworthy, and we’ve really been partners with them over many, many years.
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