Given the propensity of US equity funds to underperform their benchmark, the Polen Focus US Growth Fund tries to do things differently.
Founded in 1979, Polen Capital Management has now launched a Dublin-domiciled Ucits version of its US equity growth strategy, managed by Dan Davidowitz and Damon Ficklin.
The fund will be run to Polen’s existing concentrated large cap US equity strategy based on the principal that earnings growth is the primary driver of long-term stock price appreciation.
Act like ‘business owners’
Stan C Moss, CEO of Polen, explained: “Our mission has always been to outperform the broader market while assuming what we believe to be only moderate levels of risk. This happens to be the 25th year we have managed our strategy and we have accomplished our mission with a great deal of consistency over the years.
“By only owning a concentrated portfolio of high-quality, dominant companies and having a five-year or greater time perspective for holding each company, we have demonstrated an ability to produce excess returns with lower levels of volatility and better downside protection than the market overall.”
Co-manager of the fund Davidowitz joined Polen Capital Management in 2005 after five years at Osprey Partners Investment Management, while Ficklin joined in 2003 from Morningstar.
Davidowitz said that in running the fund he thinks and acts like a business owner rather than a trader.
Criteria a company must meet:
- Possess a pristine balance sheet with plenty of cash and little if any debt
- Generate free cashflow far in ecess of what is required to run the business
- Have sustained a 20% return on capital through a market cycle
- Have stable or expanding profit margins
- Have a shareholder-friendly management team
“These are tough criteria and in 25 years Polen Capital has owned fewer than 100 companies in total,” Davidowitz said.
“We only want to own the companies with the strongest financials and biggest competitive moats. Some of our companies have seen slower growth due to the decelerating economy, but as long as their competitive advantages are intact and the long-term prospects remain robust, we will continue to hold them.”
Index-beating returns
The firm’s track record goes back to 1989 and its annualised return since then is 14.2% compared with 9.8% from the S&P 500 and 9.3% from the Russell 100 Growth Index.
The Polen Focus US Growth Fund is a sub-fund of Polen Capital Investment Funds, and share classes are available in US dollar, sterling-hedged and Swiss franc-hedged.
Polen said the fund would initially be marketed at UK-, Swiss- and Scandinavia-based professional investors.
