We asked the Spaceship Voyager Investment Team, Senior Portfolio Manager Jason Sedawie, and Portfolio Managers Phoebe Jin and Tommy Rogulj about the Spaceship Voyager portfolios and Where the World is Going.
The markets have been volatile recently and our Spaceship Voyager portfolios have been on a bit of a rollercoaster.
We sat down with Jason, Phoebe and Tommy to ask some customer questions and see if anything’s changed in our approach to investing in light of recent trends.
Here’s what they said.
What's your current portfolio investment strategy?
Jason, Spaceship Universe Portfolio Manager:
So we have three different funds in three different strategies.
With the Spaceship Universe Portfolio, our approach is to invest Where the World is Going, and that means investing in companies that are becoming more relevant over time.
We look for four key features for Universe stocks.
The first one is a trend. We're looking for companies benefiting from trends, like the move to cloud computing, or consumers using apps for example.
Secondly, we look for a moat which is a barrier to entry or competitive advantage against competitors. For instance, this could include a brand that helps a company stand out (brands that become verbs are always good, such as Google or Uber for ridesharing). Scale, which could give you cheaper costs; switching costs which make it hard to leave the product/service; and network effects, which can make the service more valuable as more users use it.
Thirdly, we look for strong management because they influence the building of the moats and the execution of those trends. We like to see management that own a lot of shares and act like long term owners of the business because we are aiming to be long term owners as well.
And finally, the fourth feature, we have a target return to Spaceship Universe stocks. We've got to see the potential for the company to double over a five year period which is generally 15% growth per annum.
Of those four features, the trend and moat are really important because it means companies create growth, and then capture it through the moat. And then management affects all that and results in the target return.
And so what that ends up doing for Spaceship Universe is it tends to have companies in the four traditional sectors of technology, communications, consumer discretionary, and healthcare at the expense of banks and resources.
And so we're really investing Where the World is Going, not where it's been.
Tommy, Spaceship Origin Portfolio Manager:
The investment strategy of the Spaceship Origin Portfolio is a bit different to Spaceship Earth and Spaceship Universe. It's more mechanical in nature.
Rather than selecting companies at the discretion of the portfolio manager, the Origin Portfolio selects companies according to their market cap. So the strategy itself selects the top 100 companies by market cap in international markets, and the 100 top companies in Australia by market cap.
The international portion of the portfolio is weighed at 80% and the Australian one is weighed at 20%. To ensure that Origin does follow the parameters that are set, the portfolio itself is rebalanced once a quarter.
Phoebe, Spaceship Earth Portfolio Manager:
So, there's really two parts to the Spaceship Earth portfolio strategy. Firstly, we're focused on investing in companies that have a positive impact on people and the planet, which we measure by the UN Sustainable Development Goal agenda. So companies must advance one or more of the UN SDGs.
Secondly, like the Spaceship Universe Portfolio, we're aiming to invest in companies that meet our Where the World is Going investment criteria of investing in companies that benefit from long-term secular trends. So a similar investment process to Universe but with the added criteria of meeting one of the UN Sustainable Development Goals such as no poverty or reduced inequalities.
What might change your mind about a company you've invested in?
Tommy, Spaceship Origin Portfolio Manager:
So for our actively managed portfolios (Spaceship Universe and Spaceship Earth) we may change our minds about a company if there's an adverse change to any of the four criteria that Jason mentioned earlier, being changes to the trend itself, deterioration in the economic moat of the company, changes to management and/or the failure of a company to meet a fund's return requirement.
With that being said, we're constantly monitoring our positions on a day to day basis. And we make changes in accordance with the conviction levels that we have.
For the Spaceship Origin Portfolio, which is rules-based in nature, as mentioned earlier on, a position would be removed if it doesn't meet the parameters of the fund itself.
I know you don't have a crystal ball. But how long do you think this correction will last? And can you tell us about the correction?
Jason, Spaceship Universe Portfolio Manager:
Unfortunately, I don't have a crystal ball. But what we do know is that volatility is a feature of stock markets, not a bug.
Because of that volatility, stock returns are generally above that of other asset classes like bonds and savings accounts over the long term. And while bonds and savings accounts are less volatile, they tend to get lower returns over the long term.
So if we look back at past history, with the S&P 500, over the 42 years since 1980, peak to trough that market has fallen 14% every year on average. There'll be a different reason every year, but peak to trough there'll be a 14% move on average.
And what's worth pointing out is that of those 42 years, in 32 of them, they've ended positive despite the volatility.
For the Voyager portfolios, because we're genuinely growth investors, investing in the future, we get hit harder by interest rate rises. But interest rates are a one-off impact, and while they do have an impact on the portfolio, it's considered short-term.
So rising interest rates generally won't affect whether Nvidia is still rolling out their chips at twice the performance every year, and interest rates won’t generally affect whether Google will be successful in the cloud. They generally won't affect whether people are streaming more Netflix, or Spotify, for example.
Spaceship Universe, in particular, is investing in multi-year trends.
These multi-year trends go for a long time, and they compound versus have a one-off effect. We're still focusing on these long-term trends, because they're very powerful and they compound over time, they’re not just one-offs. Volatility can be painful in the short term, but I think it's important just to keep that long-term perspective.
For example, you look at past share prices or unit price charts, and you can say, “Oh, wow, looks like a good (investment) opportunity, two years ago during COVID, etc,” but during the time it felt horrible.
But we monitor these trends. These trends are still in their early stages, and they're still growing and compounding. And I think the reporting results were quite positive in the sense that the fundamentals were still there, there were good results in the cloud stocks as well. So as long as those fundamentals are there, we believe that over the long-term that will be reflected in the performance of these companies.
What are the big investment trends for 2022? And are they different to previous years given the recent corrections?
Tommy, Spaceship Origin Portfolio manager:
Spaceship's investment process is predicated on identifying fast-growing trends, and then selecting those companies that are best placed to benefit off the materialisation of those trends over the long term.
The thing is, these are long-term trends, and so they don't really change from year to year. We're talking about the rise in e-commerce, the transition to cashless payments or even the adoption of cloud computing services. Market corrections actually do not generally have much of an impact on the adoption rates of these big trends in any significant manner.
Phoebe, Spaceship Earth Portfolio manager:
To add to what Tommy said, one big trend we're invested in for the Spaceship Earth portfolio is the energy transition from fossil fuels to renewables. So for example, Enphase energy is a company we actually recently increased our exposure to in both the Spaceship Earth Portfolio and the Spaceship Universe Portfolio.
How long could it take a first time investor to see a return? And what performance could someone expect if they invest in Spaceship Voyager for the full seven years?
Jason, Spaceship Universe Portfolio Manager:
Performance is a function of time horizon and the underlying process. So while performance will change over time, the underlying process will remain the same.
So that's why we've talked a lot about the processes between the different funds so that people understand the different choices they have.
But back to the time horizon, we suggest a timeframe of seven years because stocks can be volatile in the short term. And we do have this ability to dollar cost average, which can be quite useful for investors.
Tommy, Spaceship Origin Portfolio Manager:
Generally, over the long term, equity markets can generate total returns of between 8 to 10% annually on average. Of course, this depends on what benchmark or index that you're referencing. For the Spaceship Origin Portfolio, customers can expect market-like returns similar to these broad based indices, while with Spaceship Universe and Spaceship Earth, we aim to outperform the broader equity market over that suggested seven year minimum investment period.
The Spaceship Voyager portfolios invest in Google, Nvidia, Spotify, Uber, and Enphase Energy. Please refer to the Spaceship app or our website for more information on what each portfolio invests in.
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.
