Star fund manager Manu Daftary is about to launch his first new mutual fund in a decade.
Quaker Global Growth
, which may open as early as July 1, will give the market maestro free rein for the first time to invest in the fast-growing markets outside the U.S.
The Daftary says he's looking closely at emerging markets such as India, China, Russia and Brazil. He'll also be free to invest in developed markets. "It's global, so we can go anywhere," Daftary says.
In actual dollar terms, China's growth last year nearly matched that provided by the U.S.
The news comes just as his original fund, domestic-focused
Quaker Strategic Growth (QUAGX), shows it's back on track. Daftary has shrugged off a poor 2006 and is posting an 8.9% return so far this year.
That compares with just 5.4% for the S&P 500. The $700 million fund has one of the best track records anywhere since it was launched in November 1996. (I am an investor in the fund.)
What's the reason he's going global now? Put bluntly, Daftary believes America no longer offers the best growth. "The U.S. is slowing down, but the rest of the world is very strong," he says. "It's very clear to me that the U.S. economy is not contributing as much to global growth as it has in the past. But there is ample growth in overseas markets."
We spoke on the day that first-quarter figures showed that U.S. GDP growth had fallen to just 1.3%, its slowest rate in four years. As Daftary pointed out, the companies on Wall Street that had the best quarter often did so thanks to overseas gains.
Everyone knows how fast the Chinese economy is growing in percentage terms. But of course that's from a very small base, right?
Wrong. Daftary points out a fact that few in America realize: In actual dollar terms, China's growth last year nearly matched that provided by the U.S. "China is adding nearly as much GDP a year as the U.S.," he says.
Based on the latest figures, you can pretty much assume it will overtake the U.S. soon -- possibly as early as this year.
Foreign stocks, mostly from developed countries, already make up 18% of the portfolio in the domestic fund. It has a 25% limit for overseas equities.
The new fund will be structured along the same lines as the current one. Daftary's DG Capital, in Boston, will invest the money. Quaker Funds, in Malvern, Penn., will do almost everything else, from administration to marketing. Daftary will be free to invest anywhere, take some short positions, and hold lots of cash when he cannot find great opportunities.
And although the global stage is bigger, Daftary promises to stick to the same tried-and-true techniques that have worked for him so far here in the U.S. "It's going to be the same thing that we do when we manage money domestically," he says. "It's just taking the process to another level. Find fast-growing sectors in the economy, and then stock-pick our way into them."
Jeff King, founder and head of Quaker, expects the fund to start with just $5 million to $10 million. Most of that, he says, will come from those directly involved. They're putting their own money on the line. "Manu has agreed to put in $1 million or $2 million," King tells me. "I'm personally going to put in $1 million. There are board members and trusts who have committed, along with various huge Manu fans."
In keeping with TSC's editorial policy, Brett Arends doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Arends takes a critical look inside mutual funds and the personal finance industry in a twice-weekly column that ranges from investment advice for the general reader to the industry's latest scoop. Prior to joining TheStreet.com in 2006, he worked for more than two years at the Boston Herald, where he revived the paper's well-known 'On State Street' finance column and was part of a team that won two SABEW awards in 2005. He had previously written for the Daily Telegraph and Daily Mail newspapers in London, the magazine Private Eye, and for Global Agenda, the official magazine of the World Economic Summit in Davos, Switzerland. Arends has also written a book on sports 'futures' betting.