In November 2020, Capital Group New Economy Fund (LUX) (CGNE) reached its one-year anniversary. Although new, the fund offers access to the New Economy strategy, which has an attractive, 35-year track record and is managed by the same experienced team. CGNE was recently awarded a silver rating by Morningstar. ¹

In the first year since its launch CGNE delivered a return of 29.9%² versus the MSCI All Country World Index returned of 11.7%³. In this Q&A, investment director Mario DiVito shares some insights into the strategy and some of the reasons behind its success in 2020.   

Why has the New Economy strategy been so resilient this year? 

During the COVID-19 led correction in the first quarter of 2020, growth stocks defied conventional thinking in outpacing traditionally defensive sectors of the market. While some might dismiss this as an anomaly, it became clear that several leading growth companies in fact had very resilient revenue streams and strong balance sheets to provide support during the market correction. The New Economy strategy was well positioned going into the pandemic in several key industries across technology, media, and consumer discretionary that benefitted in the work from home environment. During the market pullback, top portfolio holdings Amazon, Netflix, Microsoft, and Tencent Holdings provided positive absolute results as global markets sold off. As the market recovered, many of these same positions also participated as beneficiaries of key trends established, with strong earnings to support the thesis. 

While there have been industries and companies with tailwinds in 2020, there were clear losers in the travel, leisure, and aerospace industries, which were directly impacted by collapse in demand. Within aerospace, the long-term secular growth story was disrupted and positions in both Airbus and Boeing were relative detractors. Meanwhile, in hotels, our position in Marriott International was relatively weak as hospitality industries were hit hard by reductions in travel. 

 

1. Morningstar Analyst Rating™ as at 18 November 2020. Class Z in USD. Morningstar category: Global Large-Cap Growth Equity. Source and copyright: Morningstar. For more information on the methodology of the Morningstar ratings please go to: global.morningstar.com/managerdisclosures

2. Results for the year to 7 November 2020. Fund returns are stated in US dollar terms, shown net of management fees and expenses for a representative share class (Z), applying the maximum Total Expense Ratio (TER). The impact of fees on returns may vary depending on the investor and share class. Please visit capitalgroup.com for further details. The net asset value is calculated based on close-of-business prices which is intended, in particular, to enable investors to carry out relevant performance comparisons between CGNE and major financial indices whose value is based on such prices. Returns may therefore differ from CGNE’s official net asset value. Please refer to capitalgroup.com for further information. Source: Capital Group

3. MSCI All Country World Index with net dividends reinvested, in US dollars. Source: MSCI

 

• This material is not intended to provide investment advice or be considered a personal recommendation.
• The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
• Past results are not a guide to future results.
• If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease.
• The Prospectus and Key Investor Information Document set out risks, which, depending on the fund, may include risks associated with investing in fixed income, derivatives, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.