The AXP Threadneedle Global Equity fund (IGLGX) does not have a good long-term track record. But its performance has perked up since a new team of stock pickers came on board about two years ago.
For the five years ended in May, the $494-million fund lost 5.9%, versus a loss of 1.2% for the average global equity funds. Over the ten-year period, it gained 3.6%, on average, less than half of its peers’ 7.7% average return.
More recently, AXP Threadneedle Global was up 15.2% for the year ended last month, versus 10.5% for similar funds. This year through May, AXP Threadneedle edged down 0.4% as other funds in its category dipped 1.8%.
“I think it suffered from a series of management changes,” Dominic Rossi said of the fund, which he joined as lead portfolio manager in October 2003. Rossi is head of international and global equities for Threadneedle Asset Management Holdings, which American Express (AXP) acquired a month earlier that year. The London-based firm oversees all of American Express’s global and international mutual funds.
Threadneedle’s investment process combines macroeconomic analysis with research on industrial sectors and individual companies throughout the world. In terms of style, Threadneedle “refuses to be pigeonholed in either a value or a growth box,” Rossi said.
Within a sector, the team scans for companies that are producing better earnings and returns on capital than their competitors, but whose stocks trade at a discount to them. AXP Threadneedle Global buys mostly large-cap stocks, but it will invest in smaller ones at times. The fund typically holds 90-115 stocks.
The fund currently has 42% of its assets in U.S. stocks, including its its top holding, Citigroup Inc. (C). Shares of the financial services giant have been beaten down over the last couple of years, partly because of legal and ethical problems. But Rossi says the stock’s low valuation relative to Citigroup’s rivals strikes him as “unrealistic, given the company’s franchise.”
Because it has operations around the world, Citigroup has greater ability to grow than many of its competitors, Rossi said. On top of that, it consistently churns out returns on equity of about 19%, he said.
An American company the fund has been adding to its position in this year is home improvement retailer Home Depot (HD), another of its top ten stocks. Rossi thinks the stock is attractively valued and also sees no reason why the store chain can’t “continue to gain market share over the course of the next ten years.”