Global Trends Ecommerce Fund: Fourth Year Anniversary
Year four: Ecommerce Fund has returned more-than double the MSCI World Index
Four years ago we at Dominion saw a revolution that was changing the world: ecommerce. This trend was, and still is, not only altering how we conduct business and commerce but changing human behaviour and interaction. The millennial generation was starting to move to the demographic foreground as the largest generation in history, and they had very different habits – both in terms of business and leisure – compared to their predecessors. They are the first network generation; a generation always online, all the time. A generation connected globally, using an ever- increasing suite of online services and platforms.
What’s more other generations, both older and younger, were starting to copy their connected lifestyles. In response to identifying this multi-decade global megatrend, Dominion, which has always been at the cutting edge of structural growth investing, set up the Global Trends Ecommerce Fund – allowing our investors to benefit from the first listed equity fund that is fully exposed to the inexorable rise of global electronic commerce.
The Fund’s exceptional performance speaks to the fortitude of the ecommerce megatrend and the benefits of disciplined structural growth investing. In its first four years the Dominion Global Trends Ecommerce Fund returned 85.4%/60.6% [EUR/USD]. This is more than double the appreciation of the MSCI World Index, a proxy for global equity markets, which rose 40.5%/19.8% [EUR/USD] over the same period. Additionally, it was achieved whilst maintaining a relatively low risk profile for a growth fund, with volatility of 16.7%/14.1% [EUR/USD] over the period, only a couple of percentage points higher than the market. The Fund’s GBP denominated share class, which was launched one year ago, has performed similarly, returning 18.81% against the MSCI World Index’s 7.08%.
Four years later, looking at the global ecommerce landscape we can observe that the demographic, technological and economic drivers that form the basis of the ecommerce megatrend have actually manifested even more strongly than we anticipated. From 2014 to year-end 2017, global retail ecommerce sales nearly doubled to $2.3tln, and will more than double again by 2021. Meanwhile, worldwide 2017 B2B ecommerce activity already exceeds $7.6tln.
However, we prefer to look forward rather than back, and while the global spread of ecommerce is now firmly established in mainstream consciousness it is not a case of job done. With only circa 51% of the world online and the penetration of online services still nascent in many sectors the most we can say is that this is only the end of the beginning: ecommerce has formed a beachhead and is ready to take over the world.
Connectivity is the key to the future
The core driver of the global ecommerce megatrend is connectivity; the number of people and devices connecting to networks. Already there are 20bln internet connected devices with 10.8mln new devices connecting per day, nearly 450,000 per hour. By 2024 the number of connected devices will more than triple to 62bln, nearly eight for every person on the planet.
These connected devices will all run off internet cloud- based platforms and, using artificial machine intelligence, will provide an ever-increasing number of functions to their human users, further blurring the lines between online and offline. Businesses, economies, and society will have no choice but to adjust to people becoming wholly immersed in an always connected, always online, world. Whilst the sociological consequences are hard to predict and, perhaps, even harder to reconcile with existing norms and institutions, the economic rationale and benefits are undeniable. More and more people and businesses will use electronic networks to transfer value (our exact definition of ecommerce) and the companies that create, own, and facilitate these networks will benefit disproportionally.
These companies, benefiting from connectivity and platform usage, operate within the sectors that Dominion’s Ecommerce Fund seeks to invest in. They include payment companies such as PayPal and Global Payments, relationship networks like China’s largest social network WeChat and dating giant Match Group (owner of Tinder), digital entertainment companies like Spotify and Activision Blizzard, and online marketplaces such as Amazon and Alibaba – that is to name but a few of the numerous ecommerce subsectors. We combine exposure to perhaps the most powerful structural trend in the world today with rigorous investment disciplines such as a Growth at a Reasonable Price (GARP) investing and a risk management system that ensures we cut losers and run with winners, to create a diverse and balanced portfolio that seeks to avoid overhyped stocks that generate little to no profit or cashflows.
With this in mind, we believe that it is not unfair to say that Dominion, with its speciality in structural growth investing and thought leadership in ecommerce investing, has created the perfect vehicle for investors looking to benefit from the largest sociological, demographic and economic change of the new millennium.
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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.