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200-year-old private office launches Terry Smith fund rival

J Stern, which dates back to 1805, has opened up its successful World Stars Global Equity strategy.

200-year-old private office launches Terry Smith fund rival

A private office steeped in two centuries of banking heritage is launching a fund to rival to Terry Smith's successful Fundsmith Equity fund. 

London and Zurich-based J Stern & Co, which has acted as the family office of the Stern family since 1805, has launched the World Stars Global Equity strategy, opening up a strategy it has been managing for third party families, trustees and charities since 2010. 

The fund, domiciled in Luxembourg under the Ucits structure and managed by Stern chief investment officer Christopher Rossbach, runs on a similarly concentrated basis to Smith's, investing in a portfolio of between 25-30 shares. Turnover is typically between 10-20%. 

The Stern fund targets companies with a strong global presence, which Rossbach views as able to compete with the best in their field with a track record of growth.  

'We invest in quality and value. For us, quality is a gating condition. If a company doesn’t have the quality we look for we won’t invest no matter how cheap. We believe in finding companies that compound over time,' Rossbach (pictured right) said. 

‘Quality is a company that has a strong competitive position, is in a growing industry, has a management with a good track record and a balance sheet that can weather any adversity.’

He added: ‘More than 80% of the portfolio is not cyclical. It is this focus that can generate significant growth over the long-term and differentiates us from other funds out there.' 

Stern said the fund follows the same 'clear, simple and transparent principles' which are at the heart of the office's ethos. It does not hedge markets or currencies, take short positions or use leverage.  

This focus on quality and the simplicity of approach bears Hallmarks to Smith's top performing £18.6 billion strategy, which has taken the UK fund market by storm since its launch in 2010.

However, Rossbach was reluctant to pitch the two products against each other. 

'There are other funds based in London with similar approaches but I think there are key differences,' Rossbach said. 

‘We differentiate from others who follow a global investment approach by our clear emphasis on quality and value and focus on compound that compound over a long time. We have a track record and willingness to invest over many decades, so we can identify companies that will do well over five, 10, 25 years.’

Currently the portfolio has 40% in the US, 30% in Europe and 30% allocated to the rest of the world. 

According Stern, the strategy has returned 10.1% per year since its inception. 

Rossbach said digital transformation was key a theme running through the portfolio, with a number of firms in this area meeting his value criteria. 

‘Some of the big types of businesses we like in good and growing industries are in digital transformation, which we believe is an extremely important part of the global economy and are significant prospects of value generation, like Google, Amazon, Facebook, Adobe and Activision Blizzard,’ Rossbach said. 

These stocks complement positions in the likes of Nestle and Roche. 

Rossbach highlighted the fund avoids companies subject to government regulations or intervention such as utilities and financials. 

‘We find it difficult to invest in financials because on all key metrics, assets, liabilities or equities as there is a great deal of uncertainty,' he said. 

The Stern family has seeded the fund with $30 million (£23.3 million) and the fund currently has $45 million in assets under management.

The fund's retail B share class levies an annual fee of 1.2% and carries an minimum investment of €5,000 (£4.315). The A share class has a minimum investment of €900,000 and an annual charge of 0.9%.  

Meanwhile the institutional share class carries a minimum investment of €25 million and an annual charge 0.75%. 

 

 

 

 

 

 

 

 

 

 

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