Conviction investments in good ideas will see out volatility, says Capital Group’s Matt Reynolds

Homework, patience and conviction will see investors through global volatility, says Capital Group’s Matt Reynolds.

Matt Reynolds, investment director at Capital Group. Picture: Hollie Adams

New Capital Group investment director Matt Reynolds says investors should not become distracted by the global uncertainty flowing from trade wars and geopolitical instability and should remain fully invested in high conviction stocks underpinned by strong, long-term thematics.

The former head of Australian Equities at Colonial First State Global Asset Management said while there was plenty of volatility in the headlines, investors that focused on big, long term ideas would still be successful.

“At the moment they (the headlines) are incredible, in terms of the number of them. But from a funds management point of view, we really think that people should stay focused on the stocks they are invested in and the individual companies,’’ he told The Australian.

“The ideas that underpin those companies – such as growth in software usage, the performance of platform companies like Stock Exchanges around the world, are areas that have strong tailwinds to their performance. Investors that are invested in those big ideas should be ok. If you remain focused on that, you will continue to derive good investment results.”

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Despite US President Donald Trump’s announcement last month that the United States and China had reached a “historic” Phase 1 trade agreement, a deal has not been signed. China remains concerned about the fate of America’s tariffs on $360 billion worth of Chinese goods and is closely watching the ongoing impeachment proceedings against the president.

But Mr Reynolds said a trade deal or the ongoing prospect of a resolution won’t “of itself drive an individual investment decision”.

“We continue to undertake fundamental research in all markets – even without something being signed – using our extensive research capabilities to uncover opportunities that are often created by volatile stock prices,’’ he said.

Capital Group, which has been serving Australian wholesale and institutional clients since 2012, is renowned on the global stage for its long-term approach to investing.

Capital Group’s flagship global equity fund, the New Perspective Fund, has been running for more than 45 years.

Over that period it has delivered excess return of around 5 per cent above than the index every year, for more than 40 years.

More importantly it has outperformed in 100 per cent of down markets and 85 per cent of up markets and – according to statistics provided by Capital – generated 4.3 times more wealth for investors than an investment in the index would have done over the same period.

“It is the ability for the fund to maintain its focus on individual stocks that leads to better investment results,” Mr Reynolds said.

“Stock by stock, company by company, doing the modelling of the financials, understanding the trends that are driving the revenue lines. It is the hard work. As a patient investor, if you are right, you should get rewarded for that.”