Atlas Trend Heading In The Right Direction

AtlasTrend has a collection of actively managed funds that are effectively model portfolios of international shares, but arranged in ‘themes.’

By now, Australian investors know that they should be diversified beyond holding only local stocks. Not only does the Australian share market account for less than 2 per cent cent of the total value of world share markets (despite being the twelfth-largest share market in the world), it is a highly concentrated domestic market, in which more than half of the market cap is represented by banks and big miners. Investors need exposure to other sectors, for example technology and major pharmaceutical companies, and for that they have to look to overseas stocks.

You are introducing currency risk into the equation by buying overseas stocks – changes in the Australian dollar’s exchange rate can worsen any losses you make, or wipe out any gains – the opposite can also be true. Currency movements can also increase your gains, and protect against investments losses.

In any case, many investors actually want the exposure to overseas currencies: instead of seeing it as “currency risk,” they see it as another layer of diversification.

There are a variety of ways for Australian investors to invest overseas: they can buy foreign shares themselves, they can use unlisted trusts that buy international shares, and they can buy ASX-listed exchange-traded funds (ETFs) and listed investment companies (LICs) that give them a stake in overseas markets.

And with the launch of AtlasTrend, they have a new vehicle to consider.

AtlasTrend has a collection of actively managed funds that are effectively model portfolios of international shares, but arranged in “themes.” The approach is based on thematic investment, which targets highly specific exposures, based on the major macro-economic, geo-political, demographic, technological, industrial, environmental and social changes influencing the global economy and society.

These factors can generate deep and far-reaching change – which can play out over many years, and throw up returns that a thinking investor can plan to capture. Typically, thematic investing is driven by changes that come to be seen as inevitable – but were not so certain when the investment was first made. Investors who tap into these profound thematic changes early can harness tremendous first-mover advantage.

“We think that the thematic portfolio approach will help investors who might have been a bit reluctant to invest overseas to be more comfortable with it, because they can understand the logic of the themes,” says Kent Kwan, co-founder of AtlasTrend.

“The reason that people are becoming more familiar with major international companies is that in many cases they use the products or services those companies sell,” says Kwan. “We want to get people to think a bit like that, and stop thinking that the only companies with which they’re familiar are CBA, Telstra and BHP. We think putting it in the thematic basket will make overseas a bit more approachable and understandable, because investors can relate to those themes.”

“Our portfolios only use direct shares: our investment universe covers any stock listed on a developed-world market, with a market cap of US$1 billion or more. That covers approximately 5000 or so companies. Each stock has a clear reason for inclusion, that fits the theme to which the investor wants to be exposed,” says Kwan.

AtlasTrend currently has four actively managed funds open for investment. They are:

Big Data: designed to invest in the rapid expansion of the digitised world, and the use of “big data” analysis to provide better products and services to customers. Currently comprises eleven stocks, including:

Digital Realty Trust – the world’s largest data centre real estate investment trust.
Splunk – a leader in big data analysis software.
IBM – IT giant, also a big provider of software to manage big data.
Alphabet – the holding company for Google, Inc.

Healthy Lifestyle: designed to invest in companies that promote a healthy lifestyle, which will benefit from high growth as people become more socially and medically conscious. Currently hold ten stocks, including:

Whole Foods Market – the world’s largest pure play natural and organic food retailer.
Whitewave Foods – producer and wholesale distributor of organic and natural food and beverages products.
Nike – athletic clothing and footwear giant.
Sanofi – global market leader in pharmaceuticals and healthcare products.

Online Shopping Spree: designed to invest in the global growth of e-commerce. Currently features nine stocks, including:

Alibaba – creator of Alibaba.com, one of the world’s leading online marketplaces for retail and wholesale trade.
Rakuten – Japan’s and one of the world’s largest online marketplaces, which allows customisation of online stores.
Expedia – a leader in online travel bookings with notable brands including expedia.com, hotels.com, wotif.com and trivago.
Amazon.com – the world’s leading online retailer

Splurging Baby Boomers: designed to invest in companies that are benefiting as the “baby boomer” generation gets older. Currently comprises nine stocks, including:

Daimler – manufacturer of Mercedes Benz, a business at the forefront of technologies targeted at baby boomers.
Royal Caribbean – the world’s second largest cruise line, benefiting from baby boomers’ increasing spend on travel/leisure.
Celgene – global biopharmaceutical company with leading treatments for illnesses that impact baby boomers.
Fresenius – global provider of healthcare products and services and Germany’s largest private hospital operator.

“The portfolios have been designed to ease people into international investing, and to get them engaged about their investments – they understand the theme, they can relate to the theme, and that helps them to be comfortable with how these companies generate their revenues and profits. The market cap criterion, the developed market criterion, is also deliberate: we want investors to be comfortable that these are very substantial, blue-chip stocks,” says Kwan.

“Our primary target is self-managed super funds (SMSFs), which all the data tells us are not that well-diversified offshore, because they like fully franked stocks – but also, we think the product suits younger wealth accumulators, who are even more likely to understand the thematic approach.”

Introducing AtlasTrend Video

The funds – which are not currency hedged – are open only to AtlasTrends’ members, who pay a membership fee of $27 a month. The funds, which are managed investment schemes, have a minimum investment of $1000, or $100 a month if people choose a regular investment plan. “The funds also charge a performance fee, but only when the individual investor sells – we then take a cut of their individual performance. If an investor doesn’t make money, the only revenue we would have gained from that investor is their membership fee since the funds don’t charge a base management fee,” says Kwan.

Once members join they get full information on each of the fund portfolios, including a detailed description of each stock. The portfolio percentages are updated daily. “A member gets access to all that information, without ever having an investment in any of the funds. Technically, the member could take that information and go to an online broker and trade, if they chose to,” says Kwan.

“No other fund manager would normally disclose their portfolio positions, because it’s their IP. We can do that because someone has paid us a membership fee to do that. What we’re trying to do in the end is to encourage people to invest internationally, and get engaged with their investments. It’s really a bit of a blend of a funds management service and an information service: that’s our point of difference in the marketplace,” says Kwan.