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The Polen Capital Focus Growth Fund celebrates its 33rd Anniversary

The Polen Capital Focus Growth Fund celebrates its 33rd Anniversary

When Montgomery Investment Management announced its partnership with Polen Capital nearly twelve months ago, we were delighted to see their flagship fund had such an extraordinary long-term track record. And that fund – the Polen Capital Focus Growth Fund – has just celebrated its 33rd Anniversary.

The Polen Capital Focus Growth Fund (PCFGF) is a U.S. growth strategy, with an emphasis on companies with high returns on capital, double digit total returns and sustainable earnings growth within a concentrated portfolio of approximately 25 stocks. The strategy is characterised by very low portfolio turnover with multi-year holdings periods.

Launched on 1 January 1989, in the 33 years to 31 December 2021, the PCFGF’s compound annual return, net of all fees and expenses, has delivered 14.9 per cent in USD, whilst the S&P 500 Accumulation Index has increased by 11.3 per cent per annum (again in USD).

In short, $100,000 invested in the PCFGF 33 years ago would now be worth $9.87m, whilst the same $100,000 invested in the S&P 500 Accumulation Index would be worth $3.47m. Whilst the compound annual out-performance has been 3.59 per cent, after expenses, the PCFGF’s record has delivered a difference of $6.85m or nearly 200 per cent on the $3.47m in today’s value invested in the S&P 500 (Accumulation) Index.

The strategy has enjoyed a powerful bull market from declining interest rates, with the US ten-year Treasury Bonds falling from 9.25 per cent to 1.75 per cent over the 33 years under review. Nevertheless, further analysis reveals:

  • The PCFGF has delivered a positive return in 28 of the 33 calendar years, 85 per cent of the years under review;
  • The PCFGF has outperformed the S&P 500 (Accumulation) Index in 23 of the 33 calendar years, 70 per cent of the years under review. The annual out-performance exceeded 5 per cent, after expenses, in 15 of those 23 years. The best run was the ten-year period from 1993 to 2002, inclusively.
  • The PCFGF has under-performed the S&P 500 (Accumulation) Index in 10 of the 33 calendar years, 30 per cent. In four of these 10 years, the annual under-performance exceeded 5 per cent. The worst run was four-year period from 2003 to 2006, inclusively.
  • The best calendar year for the PCFGF and the S&P 500 was 1995, when they delivered a return of 46.3 per cent and 37.6 per cent, respectively.
  • The worst calendar year for the PCFGF and the S&P 500 was 2008, when they delivered a return of negative 28.4 per cent and negative 37.0 per cent, respectively.
  • Over the 33 years under review, there were two periods which would have tested the patience of most investors. These were 2000-2002 inclusively and 2008, when the S&P 500 was down 37.6 per cent and down 37.0 per cent, respectively. In the case of the PCFGF, the decline was a more muted 16.5 per cent (2000-2002) and 28.4 per cent (2008).
Date Polen Capital Focus Growth Fund (net USD) S&P 500 Accumulation Index (USD) Alpha
1989 31.24% 31.69% -0.45%
1990 13.13% -3.11% 16.23%
1991 39.03% 30.46% 8.57%
1992 4.76% 7.62% -2.86%
1993 11.85% 10.07% 1.78%
1994 8.96% 1.32% 7.64%
1995 46.33% 37.57% 8.76%
1996 30.40% 22.96% 7.44%
1997 35.63% 33.36% 2.27%
1998 30.19% 28.58% 1.61%
1999 22.65% 21.04% 1.61%
2000 -4.44% -9.10% 4.66%
2001 -5.50% -11.93% 6.43%
2002 -7.53% -22.06% 14.53%
2003 16.67% 28.68% -12.01%
2004 7.76% 10.88% -3.12%
2005 -1.43% 4.91% -6.34%
2006 14.04% 15.80% -1.75%
2007 9.86% 5.49% 4.36%
2008 -28.42% -37.01% 8.58%
2009 38.50% 26.44% 12.06%
2010 14.70% 15.05% -0.35%
2011 8.25% 2.12% 6.13%
2012 11.75% 15.98% -4.23%
2013 23.07% 32.41% -9.34%
2014 16.95% 13.69% 3.26%
2015 15.27% 1.41% 13.87%
2016 1.22% 11.98% -10.76%
2017 27.14% 21.83% 5.31%
2018 8.47% -4.38% 12.85%
2019 38.06% 31.49% 6.58%
2020 34.00% 18.40% 15.61%
2021 24.04% 28.72% -4.68%

In a similar fashion, the Polen Capital Global Growth (Global Growth) strategy, recently celebrated its seventh anniversary. Readers will know that Montgomery launched the Australian class of the Polen Global Growth Fund on 15 March last year.

Employing the same disciplined investment approach to its Focus Growth counterpart, the Global Growth strategy has delivered a compound annual return of 16.53 per cent, in USD and after all fees and expenses, whilst the MSCI All Country World Index (ACWI) has increased by 10.89 per cent per annum in USD, in the seven years since its launch on 31 December 2014.

Given the above returns, a $100,000 investment in the Global Growth strategy at inception would be worth $291,785.85 today, while the same $100,000 in the MSCI ACWI would have grown to $206,180.07.

Analysis of the Global Growth strategy’s returns reveal:

  • The strategy has delivered investors a positive return in each of its seven calendar years of existence.
  • The strategy has outperformed its benchmark five out of seven calendar years, 71.4 per cent of the time. In each of these five years, the margin of outperformance above the MSCI ACWI has exceeded 7.59 per cent.
  • In three of these years, 42.8 per cent of the time, the Global Growth strategy has exceeded its benchmark by more than 9.75 per cent.
  • 2019 was the best calendar year for both Global Growth and the MSCI ACWI, with returns of 36.35 per cent and 26.60 per cent respectively.
  • 2016 was the Global Growth’s weakest year, returning a flat return of 0.34 per cent, while the MSCI ACWI’s weakest year during the same period under review occurred two year later, in 2018, posting a -9.41 per cent return. This highlights the differing shapes of the strategy and index portfolios, emphasising Polen Capital’s benchmark unaware approach to investing.
Date Polen Capital Global Growth Fund (net USD) MSCI ACWI (USD) Alpha
2015 9.14% -2.36% 11.49%
2016 0.34% 7.86% -7.52%
2017 31.55% 23.96% 7.59%
2018 2.22% -9.41% 11.63%
2019 36.35% 26.60% 9.75%
2020 24.13% 16.27% 7.86%
2021 17.07% 18.54% -1.48%

Despite a rocky start to 2022, investors will be well served to remember the great wealth that can be generated when investments in high-quality businesses are compounded over the long-term. As Australian golfer Craig Parry often quips, the favourite club in his golf bag is: “patience.”

INVEST WITH MONTGOMERY

Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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