On July 1, 2021, GQG Partners launched three new “quality dividend” funds. For the sake of simplicity, we will headline GQG Partners Global Quality Dividend Income Fund since it straddles the realms of its U.S. and International siblings. The strategy seeks to invest in high-quality dividend-paying companies, primarily large caps, with attractively priced future growth prospects. The fund will be managed by Rajiv Jain and James Anders.
What will they do?
The strategy is to assemble a portfolio of 30-70 stocks. The target universe is dividend-paying securities of U.S. and non-U.S. companies, including those in emerging market countries. GQG Partners primarily relies on fundamental, rather than quantitative, research to evaluate each business based on financial strength, sustainability of earnings growth, and quality of management. GQG is more typically a value than a growth investor.
Why might you be interested?
In general, both dividends and an emphasis on quality firms pays off. They do not thrive every year, but they’re correlated with the sort of relentless compounding that makes them appropriate attributes for your core equity holdings.
But, really, the attractive is manager Rajiv Jain. Mr. Jain joined Vontobel Asset Management as an equity analyst in 1994. By the time he left in May 2016, he had risen to become their chief investment officer, co-CEO, and manager on 15 funds available to American and European investors. He was responsible for portfolios valued at $50 billion, including $30 billion in emerging markets investments, and he built their Quality Growth boutique. The GQG in the name of his firm stands for Global Quality Growth Partners.
It is fair to describe his career to date as “spectacularly successful.” Over a ten year period, Mr. Jain’s Vontobel fund posted the highest returns among diversified E.M. equity funds, suffered the smallest maximum drawdown, had the second-lowest volatility, and tied for the lowest downside volatility (a variation of standard deviation focusing on “bad” volatility) which led to the group’s second-highest Sharpe ratio (the industry’s most widely-used measure of risk-adjusted returns).
Analysts have noticed. He was recognized as Morningstar’s International Fund Manager of the Year for 2012 (“Jain’s approach has produced attractive risk-adjusted returns over his tenure”) and won Morningstar Europe’s Global Equity Manager of the Year (“Performance metrics … confirm Jain’s ability to limit risk during market downturns while driving strong returns across a market cycle to offset the inherent weakness in his approach during low-quality rallies. Risk-averse investors who look for global equity exposure are in very good hands here”) nod in 2013.
His flagship GQG Emerging Markets Equity is a five-star fund that has sort of clubbed its competition in both measures of return and risk. The newer GQG Global Quality fund has a weak relative performance record, though two years is hardly a reliable sample, and a relatively attractive risk profile.
Bottom Line:
GQG is a very strong firm. In less than five years of operation, they’ve earned enough trust from investors that they now manage $84 billion in assets. Mr. Jain has assembled a distinctive team of 17 analysts, including former investigative journalists and forensic accountants. They offer six funds and have seen consistent inflows for years. Seventeen members of the investment team hold ownership stakes in the firm.
That said, the newer GQG funds have had strong absolute performance but weak relative performance. They absolutely shined during the short-lived Covid bear market in the first quarter of 2020; they outperformed their peers by 320 – 660 basis points. Across their lifespans, all GQG funds have top-tier ratings for downside deviation, down market deviation, and bear market deviation. Investors in these new funds are likely to be well rewarded if they track the success of the funds across complete market cycles (that is, through both bull and bear phases of the market) though less pleased if they focus only on the most exuberant stretches in a bull market.
The fund’s expense ratio, after waivers, is 1.0% for the Investor shares. The minimum initial purchase is $2,500. The fund’s webpage is, understandably, somewhat sparse just now.
