equities
A stock masterclass: 15 years of World Brands
LOIM’s World Brands equity strategy has a mission to find the best-in-class brands globally. Launched in August 2009 (and managed by LOIM since June 20181), World Brands focuses on companies leading the charge as technological innovations, demographic shifts and new lifestyle trends transform economies. We outline the strategy’s performance since inception, the philosophy behind our stock selection and the shifting forces influencing which brands dominate in today’s market.
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Need to know:
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Track record
What is key to knowing which brands to invest in right now?
World Brands focuses on the secular growth opportunities shaping world-leading brands across the regions. Since the strategy launched 15 years ago, we have seen new companies rise to prominence as forces such as digitalisation transformed markets. Some legacy brands have been able to adapt; others have struggled to compete.
World Brands has outperformed its benchmark since inception (see figures 1 and 2)2, even as the landscape of leading brands has constantly evolved. How have we weathered the dramatic sectoral shifts in the market over the past decade? By targeting companies performing strongly on key growth metrics, regardless of their sector.
A high-conviction strategy with a quality-growth bias, World Brands seeks brands worldwide with the best potential for superior, sustainable growth. In financial terms, that means an ability to achieve a high return on capital invested and long-term, compounded returns throughout market cycles.
FIG 1. World Brands strategy gross performance vs benchmark3
FIG 2. Annualised gross absolute return3
ITD
World Brands strategy
Benchmark
10Y
World Brands strategy
Benchmark
5Y
World Brands strategy
Benchmark
FIG 3. Synthetic risk indicator (SRRI)4
What creates valuable brands?
Focused on consumers, the World Brands investment universe is at the crossroads of major trends including demographic shifts, multiple lifestyle changes and disruptive technologies. We cover over 400 companies globally and group them into three brand categories: global, fast-growing or upcoming, and digital.
Within those categories, we look for the following competitive advantages:
- Hard-to-replicate intangible assets: high brand or platform value, with best-in-class products
- Recurring revenues: consistent, predictable income streams
- Pricing power: consistently above average profit margin, as evidenced by the ability to raise prices over the cycle
- High switching costs: embedded in digital ecosystems
- Brand loyalty: community attachment to brand values
The World Brands team – which includes Portfolio Manager Andrew Gowen, and Equity Analysts Lyra Li, Ashley Chung and Faye Gao – does not invest in every sector covered by our benchmark, the MSCI World. We have steered away from energy companies or utilities, for example.
Examples of companies in each of the brand categories:
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Digital brand
Nvidia5: providing the infrastructure for generative AI computing
- Leading provider of GPU (graphics processing units) chips, with capabilities essential for AI computing
- Benefits from having an established design leadership, a first-mover advantage and a strong product pipeline
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Global brand
Novo Nordisk5: a leader in weight-loss medications
- Manufacturer of Ozempic and Wegovy, the leading GLP (glucagon-like peptide) solutions targeting the global diabetes and obesity weight-loss market
- More than 90% of group sales from diabetes and obesity care. Company has maintained its lead over emerging, competitive offerings
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Upcoming brand
On Holdings5: born in the Swiss Alps
- Swiss performance running shoe company founded in 2010 that is popular with both recreational and professional runners
- Design philosophy is centered around the patented ‘CloudTec’ technology. Company is expanding into sportswear, activewear and lifestyle apparel
Complementary sector exposure
We have typically found the best opportunities across six industries: information technology (e.g., artificial intelligence, software); consumer discretionary (sports, internet, luxury, travel); communication services (entertainment, gaming, social media); consumer staples (food, personal care); financials (fintech, credit cards); and healthcare (obesity, dermatology)6.
Secular growth opportunities shaping world-leading brandsAreas offering potential exponential growth and large profit pools for World Brands stocks:
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The leading digital brands, for example, have entrenched market positions that are constantly reinforced through innovation and investment in the customer proposition, building loyalty and reducing churn. Their deep (and constantly expanding) data lakes allow the best-in-breed digital brands to refine their offerings, receiving a greater share of spending in the economy and leading to sustained earnings growth.
Even within sectors, however, investment success ultimately comes from choosing the right brands. Stock selection alone has contributed almost all (i.e., 95%) of the outperformance of World Brands over its benchmark since mid-20152,8. Sector allocation has contributed the rest.
New leaders
Highly active management has allowed the World Brands team to adapt quickly to changing market conditions and continue to deliver returns for our investors since the strategy’s launch. During the past 40 years, the landscape of leading brands evolved to see technology names assume the top spots once dominated by automotive and consumer products companies. By 2030, we expect the market leaders might include brands involved in healthcare, AI, space exploration and robo-taxi services.
When assessing potential investments, LOIM excludes certain businesses, such as those involved in controversial weapons, and has restrictions on others. We also look for management teams that are making measurable progress in the transition to more sustainable business practices. To that end, we employ a proprietary ESG methodology, and conduct in-depth analysis of business models, corporate strategies and exposure to long term trends and economic cycles.
With our focus on sustainable business models and companies with strong competitive advantages, we believe the brands we target are well-positioned to navigate the challenges ahead and aim to deliver long-term performance.
Source
[1] The strategy was formerly managed by Clariden Leu AG (from 21.08.2009) and afterward by Credit Suisse. The strategy was transferred to LOIM on 26 June 2018.
[2] Past performance is not a guarantee of future returns
[3] Source: LOIM, 01/09/09 to 31/08/24. Benchmark is the MSCI World Index EUR ND. Performance data comes from a composite. Return compounded monthly. Risk statistics are calculated with monthly composite and benchmark returns. Past performance is not a guarantee of future results. For illustrative purposes only.
[4] The summary risk indicator assumes you keep the product for five years. Before taking any investment decision, please read the latest version of the prospectus, the articles of incorporation, the Key Information Documents (KIDs), and the latest annual report and semi-annual report. Please pay attention to the Appendix B “Risk Factors Annex” of the prospectus.
[5] Important information on case studies. The case studies provided in this document are for illustrative purposes only and do not purport to be recommendation of an investment in, or a comprehensive statement of all of the factors or considerations which may be relevant to an investment in, the referenced securities. The case studies have been selected to illustrate the investment process undertaken by the Manager in respect of a certain type of investment, but may not be representative of the Fund's past or future portfolio of investments as a whole and it should be understood that the case studies of themselves will not be sufficient to give a clear and balanced view of the investment process undertaken by the Manager or of the composition of the investment portfolio of the Fund now or in the future.
[6] Holdings and/or allocations are subject to change
[7] Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document
[8] Based on the available Bloomberg data on World Brands, from May 2015 to August 2024, on a gross of fees basis.
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