Sygnia FAANG Plus Equity Fund

FUND MANAGERS: KYLE HULETT AND IAIN ANDERSON

♦ Raging Bull Award for the Best (SA-Domiciled) Global Equity General Fund (straight performance over three years)

SYGNIA specialises in passive, indextracking funds, but it also has several actively managed funds, of which the Sygnia FAANG Plus Equity Fund is one. Launched in 2018, it focuses on global big tech stocks, its benchmark being the NYSE FANG+ Index.

Back then the acronyms FANG and FAANG represented the high-growth big United States tech stocks: Facebook, Amazon, Apple, Netflix, and Google. While Google is now Alphabet and Facebook now Meta, the acronyms have stuck.

Chinese companies also feature prominently in the fund’s portfolio: at the end of December, it’s top five holdings were: Baidu (12.1%), Alibaba (11.6%), Meta (11.4%), Apple (11.3%) and Amazon (11%).

The fund, managed by Kyle Hulett and Iain Anderson, has returned an remarkable annualised 38.6% a year over three years, according to ProfileData, on the back of the stellar performance of many of these big tech stocks during the pandemic.

Personal Finance put the following questions to Hulett and Anderson:

Please outline your investment philosophy/strategy for the fund?

The Sygnia FAANG Plus Equity Fund is a technology fund with a specific focus on high-growth, consumer-focused, technology-enabled global platform companies. These platforms have loyal customer bases with an expanding service range, providing decent protection against competitors, and large potential growth. As a result, the fund focuses on the large-cap, globally dominant platform companies but includes smaller up-andcoming technology companies.

While the fund has underperformed your benchmark, the NYSE FANG Index, over three years, according to your fund factsheet, it has nonethless delivered remarkable returns for investors.

To what do you attribute this outperformance?

The benchmark was selected to allow as much access to the FANG companies as possible, but in line with its philosophy, the fund itself invests away from components of the benchmark. In 2021 the benchmark dropped Twitter and replaced it with Microsoft; the fund already had a large exposure to Microsoft, but subsequently sold Twitter.

Performance is attributed to fantastic earnings growth in online platform companies, particularly in the US, accelerated by lockdowns and work-from-home strategies.

How are you positioning the fund for 2022 and beyond – do you envisage headwinds for the tech sector?

We expect some headwinds for the tech sector in the short term as US interest rates rise, but earnings growth will remain strong and the stocks should continue to perform. In 2022 we have tilted the exposure a bit more to small caps and China tech shares, which have underperformed the US giants.

Longer term, as society becomes more tech-centric and these companies continue innovating through their large R&D budgets (paid for by generous cash flows), they should continue to grow through potentially life-changing new products and services.

Investors are comfortable with exposure to these global companies because of brand recognition and strong institutional support. Indeed, when many of the FANG stocks have market caps larger than the entire South African stock exchange, it is a question of how much exposure you should have rather than if.

Anti-trust issues and new regulations remain the biggest risk to the sector, but long term, investing in companies that can grow market share in a low-growth world are a significant theme for Sygnia. | Martin Hesse